European shares sag on monetary policy uncertainty
* FTSEurofirst 300 down 0.5 pct, Euro STOXX 50 down 0.5 pct
* UK shares underperform on interest rate hike concerns
* "Time to buy June 2014 puts" -LCM's Troin-Lajous
* European Stocks' P/E ratio hits 2007 levels
* "Risky not to be in risky assets" - Allianz GI's Utermann
PARIS, Nov 13 (Reuters) - European stocks dropped on Wednesday, with a broad benchmark hitting a three-week low, as uncertainty over the outlook for equity-friendly monetary stimulus from central banks prompted investors to book recent hefty profits.
Data showing a faster than anticipated recovery in Britain's job market fuelled speculation that the country's record low interest rate of 0.5 percent could be raised sooner than expected, sending London's FTSE 100 down 1.4 percent, underperforming other European indexes.
Also hitting sentiment, Atlanta Fed President Dennis Lockhart, seen as a centrist in policy terms, late on Tuesday said a cut in the Federal Reserve's bond-buying operations remained a possibility at its Dec. 17-18 meeting, earlier than what most U.S. primary dealers expect.
At 1530 GMT, the FTSEurofirst 300 index of top European shares was down 0.5 percent at 1,284.13 points, after hitting a three-week low earlier in the session.
The euro zone's blue-chip Euro STOXX 50 index was down 0.5 percent at 3,029.43 points.
Stocks trimmed losses in late trade after a European Central Bank official was quoted as saying the bank could adopt negative interest rates or purchase assets from banks if needed to lift inflation.
ECB Executive Board member Peter Praet made the comments in an interview with the Wall Street Journal.
The FTSEurofirst 300 is still up 16 percent since late June, a rally mostly fuelled by central banks' massive liquidity as well as by improvements in Europe's macroeconomic data.
"The rally is losing steam. The dispersion between stocks has been dropping lately which makes things more difficult for long/short fund managers to pick stocks, and overall a lot of investors have made good gains this year already and don't feel the need to chase the market higher," said Jerome Troin-Lajous at equity sales at Louis Capital Markets in Paris.
"The rise has been mostly fuelled by multiple expansion and European stocks are not cheap anymore, while earnings haven't followed and a number of firms have had profit warnings. Getting protection is not a bad idea now, like buying June 2014 puts."
European stocks' sharp five-month rally has propelled valuation ratios to levels not seen since before the financial crisis started in 2007, with the broad STOXX Europe 600 index trading at 13.4 times 12-month forward expected earnings, above a 10-year average of 12.
Andreas Utermann, co-head and global CIO of Allianz Global Investors, which has 304 billion euros ($409 billion) in assets under management, said that despite this week's pullback in stocks, the asset class should continue to rally in the coming months.
"I think that central banks are set to continue to surprise capital markets on the dovish side, and risk assets will benefit most from this policy regime," he said.
"It's risky not to be exposed to risky assets, and any weakness in the market should be seen as buying opportunity."
Wednesday's pullback was broad-based, with UK blue-chips such as Barclays, GlaxoSmithKline, and Rio Tinto losing 1.6-3.1 percent.
European media stocks also featured among the biggest losers, with German broadcaster ProsiebenSat.1 sinking 4.6 percent after major shareholders placed 35 million shares at 31.53 euros apiece, at the bottom of a previously given range of 31.53-32.10 euros.