(Adds closing levels, recasts with profit-taking in late trade)
* FTSEurofirst 300 dips 0.3 pct following sharp gains
* Deutsche Telekom, Bouygues, Iliad up on M&A talk
* More than $312 billion in European M&A year-to-date
* Europe stocks enjoy further inflows from U.S. funds
PARIS, May 2 European stocks dipped late on Friday as investors, wary that the confrontation over Ukraine could escalate over the weekend, booked recent gains spurred by an M&A wave.
The FTSEurofirst 300 index of top European shares ended 0.3 percent lower at 1,351.08 points. It slightly rallied following better-than-expected U.S. jobs data, before investors started to take profits off the table in late trade.
Pro-Russian rebels shot down two Ukrainian helicopters on Friday and Moscow accused Kiev of wrecking hopes of peace by launching a "criminal" assault to retake the separatist-held town of Slaviansk.
Mergers and acquisitions continued to boost a number of sectors, with Deutsche Telekom up 1.1 percent on talk that Sprint Corp has approached banks to work out funding for its bid for T-Mobile US Inc, which is majority-owned by the German telecom operator.
French telecoms group Iliad rose 4.9 percent and conglomerate Bouygues added 4.2 percent, boosted by speculation of a tie-up. JP Morgan Cazenove analysts raised their rating on Bouygues to "overweight" from "neutral", factoring in a 50 percent probability of a combination with Iliad.
"The flurry of recent deals shows a swing in sentiment from company managers. The fact that they are starting to buy means they have better visibility on the economy," said David Thebault, head of quantitative sales trading at Global Equities.
"For all the companies sitting on big cash piles, it's much faster to do acquisitions to boost their market share and improve revenue than to spend money in capital expenditure. This could be the beginning of a long wave of M&A, as valuations remain attractive."
Also on the M&A front, AstraZeneca shares dipped 0.1 percent. The company rejected Pfizer's new indicative offer of 50 pounds per share, and some traders said Pfizer might have to raise its offer again up to the 55-pound level.
"Mid-50s is a level that Astra would be far more comfortable with," said Dafydd Davies, senior trader at London-based firm Prime Wealth Group.
AstraZeneca's share price has surged by around 26 percent since news of Pfizer's interest emerged in late April.
European shares started to rally this week as corporate deal-making outweighed mixed quarterly results from companies.
So far this year, M&A activity involving a European target has grown to more than $312 billion. That is more than double the value over the same period last year and the highest since 2008, according to Thomson Reuters data.
The week's rally in European stocks was also supported by brisk investment flows, with fresh money coming in from U.S. investors in the seven-day period ended April 30, data from Thomson Reuters Lipper shows. Since the start of the year, European stocks have seen 16 weeks of net inflows from the United States and only one week of net outflows.
European M&A: link.reuters.com/qax88v
Europe bourses in 2014: link.reuters.com/pap87v
Asset performance in 2014: link.reuters.com/gap87v