* FTSEurofirst 300 dips 0.2 pct, Germany's DAX down 0.5 pct
* DAX further underperforms rest of Europe's stock indexes
* Sanctions against Russia so far seen as "soft"
By Blaise Robinson
PARIS, March 18 (Reuters) - European stocks dipped on Tuesday, trimming the previous session's gains as tensions in Ukraine following the weekend referendum in Crimea kept investors on edge.
Germany's DAX index - seen as the most vulnerable to the crisis between Russia and the West over the future of Crimea - underperformed again, and was down 0.5 percent, with Siemens falling 1 percent and Henkel down 0.8 percent.
Data out on Tuesday showed German analyst and investor sentiment fell much more than expected in March, hitting its lowest level since August 2013, knocked by fears the crisis in Ukraine could weigh heavily on Europe's largest economy.
The Mannheim-based ZEW economic think-tank's monthly poll of economic sentiment dropped to 46.6 from 55.7 in February, falling short of even the lowest forecast of 49.9 in a Reuters poll of analysts. The consensus forecast was for 53.0.
The DAX is down 4.4 percent since the start of the year, the weakest showing among Europe's main stock indexes, and strongly underperforming a 10 percent rally in 2014 in Italy's FTSE MIB index, as investors have increasingly bet on the euro zone peripheral countries' economic recovery.
"The pairs trade 'short DAX' and 'long euro zone periphery stocks' has worked pretty well, with the MIB particularly strong," said Vincent Cassot, head of equity derivatives strategy at Societe Generale.
"Volatility has risen in Europe due to the crisis in Ukraine, and there's more appetite for protection, but overall there's no panic among investors."
At 1100 GMT, the FTSEurofirst 300 index of top European shares was down 0.2 percent at 1,294.80 points, after gaining 1 percent on Monday.
Russian President Vladimir Putin announced on Tuesday that Russia would move forward with procedures to annex Ukraine's Crimean region, defying Western sanctions.
On Monday, the United States and the European Union imposed personal sanctions on a small group of officials from Russia and Ukraine accused of involvement in Moscow's military seizure of the Black Sea peninsula, although the measures were seen as modest by investors.
"The sanctions taken against Russia are relatively soft, and there has been no real escalation in the tensions in the past week, which is good news," said Talence Gestion fund manager Alexandre Le Drogoff.
"Overall, the market has been quite resilient in this Ukrainian crisis, but now it needs a positive catalyst to resume its rally, and we might have to wait for first-quarter corporate results for that."
Around Europe, the UK's FTSE 100 index was down 0.2 percent, France's CAC 40 was 0.1 percent lower, and the euro zone's blue-chip Euro STOXX 50 index down 0.3 percent.
Shares in truck maker Scania featured among the top losers, falling 5.5 percent after board members responsible for assessing a takeover bid by Volkswagen for the outstanding shares said the offer was too low and recommended that minority shareholders reject it.
Oil and gas explorer Cairn Energy plunged 10 percent after saying it would halt its share buy-back programme and posted a 2013 loss of $556 million, hit by costs for unsuccessful exploration in Morocco and the North Sea.
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