By Josie Cox and Tommy Stubbington

Portuguese stocks and bonds dropped Wednesday, as continuing concerns over the financial health of lender Banco Espírito Santo rattled investors.

That clouded an otherwise quiet session in European markets, with investors seemingly wary of taking large positions ahead of the publication of the U.S. Federal Reserve's latest policy meeting minutes later on in the session.

The Stoxx Europe 600 nudged lower by less than 0.1% to record a fourth straight session of losses.

Portugal's PSI 20 index underperformed, falling 2.1%.

Shares in Banco Espírito Santo led declines after media reports that Espírito Santo International, which owns part of Espírito Santo Financial Group, which in turn owns a large stake in BES, had delayed coupon payments on some of its short-term debt.

"Last week some clients were asked to swap the commercial paper into equity," RBS credit strategist Alberto Gallo wrote in a note. He added that BES isn't directly responsible for the repayment of any ESI bonds, but "is subjected to reputational risks given its connection to the family."

Banco Espírito Santo didn't to a request for comment.

Moody's Investors Service on Wednesday downgraded its rating on Espírito Santo Financial Group to Caa2 from B2.

"Moody's concerns regarding ESFG's creditworthiness are heightened by the lack of transparency around both the Espírito Santo Group's financial position and the extent of intra-group linkages," the ratings firm said.

Portugal Telecom shares dropped as much as 9% in response to criticism from Brazil's state development bank BNDES relating to an investment by the telecommunications company in debt issued by Espírito Santo International.

The impact was also felt in sovereign debt markets, with 10-year Portuguese government bond yields climbing to 3.82%, their highest in more than six weeks, before dropping back slightly. Yields rise as prices fall.

Traders said the uncertainty surrounding BES and declines in Portuguese stocks had caught investors off guard, given many had been betting on further gains for government debt at the start of the third quarter.

Later, the Fed minutes are expected to shed more light on when the central bank may opt to raise interest rates, especially after two Fed officials struck a dovish tone on Tuesday.

Jeffrey Lacker warned that sluggish gains in U.S. workforce productivity seen over the last several years will likely continue to hold back overall economic growth, while Narayana Kocherlakota said it could take nearly half a decade for inflation to get back to levels central bankers deem appropriate.

Deutsche Bank economist Joe Lavorgna said that he expected the minutes to reveal a more hawkish side to the Fed than has been shown in recent comments by Chairwoman Janet Yellen.

In currency markets, the Kiwi dollar soared to a 35-month high against the U.S. dollar on upbeat comments from the Reserve Bank Assistant Governor John McDermott.

The euro climbed slightly against the U.S. dollar to $1.3636.

Back in stock markets, the biggest gainers included easyJet PLC and International Consolidated Airlines, after shares in both fell Tuesday in the wake of Air France-KLM lowering its earnings guidance for 2014.

In commodities markets, gold climbed 0.6% to $1,324.50 an ounce, while Brent crude oil fell 0.4% to $108.66 a barrel, with the prospect of Libyan exports resuming continuing to weigh on prices.

Write to Josie Cox at josie.cox@wsj.com and Tommy Stubbington at tommy.stubbington@wsj.com