* FTSEurofirst 300 down 0.3 pct
* German ZEW expected to show brightening picture of economy
* Investors welcome prospect of new Italian government
* BHP fails to lift miners after strong rally
By Alistair Smout and Joshua Franklin
LONDON, Feb 18 German stocks outperformed
regional peers in cautious trade early on Tuesday ahead of data
expected to show improved sentiment over Europe's biggest
economy, while top European shares edged off three-week highs.
Investors were also cheered by Italian politics, where
centre-left leader Matteo Renzi has received a mandate to form a
new government, promising rapid tax, labour and institutional
reforms to revive a deeply troubled economy.
The German DAX held steady as investors anticipated
the ZEW economic think-tank's poll of German economic sentiment
for February, due at 1000 GMT. The survey is seen steady at
61.7, while the forecast for current conditions is expected to
rise to 44 from 41.2 in the previous month.
A positive reading could lend fresh support to the region's
equities after Germany and France posted stronger-than-expected
The German index outperformed drops on the French CAC
and Spanish IBEX. Germany's strength is seen as
complicating policy decisions from the European Central Bank,
which is considering taking action to fend off possible
deflation at their meeting next month.
"It is a very difficult balancing act that the ECB's got in
terms of setting policy for varying economies at what might be
different stages in their progress," Keith Bowman, equity
analyst at Hargreaves Lansdown, said.
"Germany has been the centre of strength and there are other
economies that are in a different place."
The Italian FTSE MIB edged 0.1 percent higher.
The broader pan-European FTSEurofirst 300 was down
0.3 percent at 1,333.53 at 0859 GMT, just off its highest levels
The index has gained 5.2 percent in just eight sessions,
fuelled by a rally in basic resources stocks, which were
a top sectoral faller in Tuesday.
Good results from heavyweight miner BHP Billiton
failed to spark the sector, which suffered from a weaker copper
"The BHP results didn't look too bad, but after a good
run-up and with a weaker metal price, other miners are in
negative territory," Manoj Ladwa, head of trading at TJM
"It should be a pretty good year for the mining stocks...
with the cost-cutting measures they've taken. But if the broader
market is going higher, it's going to need the commodity stocks
to push on from here."
Europe bourses in 2014:
Asset performance in 2014:
Today's European research round-up