* FTSEurofirst 300 index falls 0.4 percent * Retreats from two-month highs, volumes low * Prudential up after surge in operating profit By Atul Prakash LONDON, Aug 12 (Reuters) - European shares retreated from two-month highs on Monday, with low volumes in the summer holiday period and persistent concerns U.S. stimulus will be reduced soon prompting investors to trim their trading bets. At 0950 GMT, the FTSEurofirst 300 index of top European shares was down 0.4 percent at 1,225.10 points after opening firmer and setting an intra-day peak of 1,232.55, the highest since late May. Cyclical stocks, which have been buoyed particularly by central bank stimulus, led losers. With many traders on holiday, volumes were about 20 percent of its 90-day average in the first three hours of trading, quite low compared to volumes some weeks earlier and leading to wide fluctuations in share prices. "Low volumes are playing havoc at the moment and really not helping to keep things on an even keel," said Chris Beauchamp, equity analyst at IG Index. "All outlooks are highly dependent on Fed tapering at present. Since we can't be certain about anything until the Federal Reserve actually makes an announcement, caution is perhaps the only route open to investors." Investors will keep a close eye on U.S. data, with retail sales, consumer prices, housing starts, industrial production and surveys of regional manufacturing all due this week. Strong numbers will increase the chances of a cut in the Federal Reserve's bond purchases, which have supported equities, especially cyclical shares, in the past months. "Investors should stay cautious in trading in the summer months as volatility will be high and U.S. stimulus tapering concerns are in the background. Wait until September-October to place strong bets," KBC senior economist Koen De Leus said. Cyclicals were the top decliners, with autos and financial services down 0.9 percent and 0.7 percent respectively, on concerns a cut in liquidity could hurt them. But encouraging results from some firms supported their stocks at the end of the second-quarter earnings season. According to Thomson Reuters StarMine, 56 percent of the four-fifths of the companies on the STOXX Europe 600 that have reported results so far have met or beaten expectations. British insurer Prudential rose 2.6 percent to the top of the FTSEurofirst's list of gainers after saying operating profit soared 22 percent in the first-half of the year due to good performance in fast-growing Asian markets.