* FTSEurofirst 300 down 0.5 pct, Euro STOXX 50 down 0.3 pct
* Drop in inflation fuels expectation of ECB action
* Risks seen on the downside if no new ECB measures unveiled
By Blaise Robinson
PARIS, June 3 European shares slipped on Tuesday
in thin volumes, with a number of benchmark indexes retreating
from multi-year highs as investors awaited Thursday's European
Central Bank meeting before chasing stocks higher.
Expectations of fresh measures by the central bank to
support the region's fragile economic recovery and avoid
deflation were cemented on Tuesday after data showed euro zone
inflation fell unexpectedly in May.
Sources told Reuters last month that the central bank was
preparing a package of policy options, including cuts in all its
interest rates and targeted measures aimed at boosting lending
to small and mid-sized firms.
"Stocks are buoyed by hopes to see the ECB unveil new
measures, conventional and unconventional," said David Thebault,
head of quantitative sales trading, at Global Equities.
"(ECB President Mario) Draghi has been very credible so far,
but with stock indexes at such levels, if he fails to deliver
this week, the disappointment could spark a real pull-back."
At 1123 GMT, the FTSEurofirst 300 index of top
European shares was down 0.5 percent at 1,373.62 points, after
hitting a 6-1/2 high on Monday, while the euro zone's blue-chip
Euro STOXX 50 index was down 0.3 percent.
Germany's DAX, which hit a record high on Monday
just below the 10,000 mark, was down 0.5 percent.
So far this year, the FTSEurofirst 300 has gained 4.6
percent, led by peripheral markets such as Italy and Spain.
Milan's FTSE MIB index is up 14.4 percent year-to-date,
while Madrid's IBEX is up 9.1 percent.
For investors betting on further ECB action, Bank of
America-Merrill Lynch strategists suggest buying construction
and financial services stocks.
"Any potential easing or policy response which is
growth-positive could lead to some cyclical sector
outperformance," they wrote in a note.
"Construction and financial services are both cyclical and
fare well on earnings revisions and on positioning as both are
under-owned by investors."
Bucking the trend on Tuesday, shares in Logitech
rallied 3.4 percent in what traders called a relief rally for
the computer accessories maker after Apple kicked off
an annual developers' conference without unveiling new products
competing with Logitech.
Europe bourses in 2014: link.reuters.com/pap87v
Asset performance in 2014: link.reuters.com/gap87v
Today's European research round-up
(Editing by John Stonestreet)