* FTSEurofirst 300 up 0.3 pct, Euro STOXX 50 up 0.5 pct
* Tesco warning hits shares of food retailers
* Airlines down after volcano eruption in Iceland
By Blaise Robinson
PARIS, Aug 29 (Reuters) - European shares rose in early trade on Friday, recovering some of the ground lost in the previous session as investors awaited inflation figures that may shed light on the European Central Bank's next policy move.
Euro zone inflation, due at 0900 GMT, is seen falling to 0.3 percent in August following a surprise dip to 0.4 percent in July, according to a Reuters poll of analysts.
The data - which temporarily relegated events in Ukraine to the sidelines - will be a focal point at next week's ECB meeting, fuelling a debate about whether the central bank should accelerate existing policy measures to fight the risk of deflation.
"It's a bit tense ahead of the inflation figures. With the recent rally, the market may have gotten ahead of itself in pricing in fresh measures by the ECB," Saxo Bank trader Pierre Martin said.
"The recent drop in the euro currency should help support the euro zone economy, so Draghi might be tempted to wait a little bit."
At 0810 GMT, the FTSEurofirst 300 index of top European shares was up 0.3 percent at 1,373.45 points, leaving it on track to record a gain of 1.8 percent in August, its best monthly performance since May.
Shares in Britain's biggest retailer Tesco dropped 6.6 percent after it cut its profit forecast for the third time in three years and slashed its interim dividend by 75 percent.
The warning hit the shares of other UK supermarket chains, with Sainsbury down 3.3 percent and Morrisons down 3.4 percent.
Shares in European airlines fell after a small eruption occurred north of Iceland's Bardarbunga volcano, which prompted the Icelandic Met to raise the warning code for aviation to red, the highest level. In 2010, an ash cloud from Iceland's Eyjafjallajokull volcano closed much of Europe's airspace for six days.
Shares in Air France were down 1.7 percent and easyJet down 1.1 percent.
Shares in Fiat gained 1.6 percent after the Italian carmaker said its merger with Chrysler was on track to go ahead as planned in October.
Fiat said it did not expect a 500 million euro cap on the money it set aside to pay off any dissenting shareholders over the merger would be breached.
The Ukrainian crisis was still a major factor for investors after Ukraine's president said Russian troops had entered his country in support of pro-Moscow rebels who captured a key coastal town.
U.S. President Barack Obama spoke by phone on Thursday with German Chancellor Angela Merkel. The White House said the two agreed the United States and Europe should consider more sanctions against Moscow.
Europe bourses in 2014: link.reuters.com/pap87v
Asset performance in 2014: link.reuters.com/gap87v
Today's European research round-up
additional reporting by Stephen Jewkes in Milan and Victoria Bryan in Frankfurt, editing by John Stonestreet