* 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
By Blaise Robinson
PARIS, Nov 13 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
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
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
"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.