European share rally stalls ahead of ECB

martes 3 de junio de 2014 10:42 GYT

* FTSEurofirst 300 down 0.4 pct, Euro STOXX 50 down 0.2 pct

* Drop in inflation cements expectation of ECB action

* Risks seen on the downside if no new ECB measures unveiled

By Blaise Robinson

PARIS, June 3 (Reuters) - European shares slipped on Tuesday in thin volumes and some benchmark indexes retreated from multi-year highs as investors held back from chasing stocks higher before Thursday's European Central Bank meeting.

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 unexpectedly fell last month.

The ECB is widely expected to trim its refinancing rate, send its deposit rate into negative territory and launch a long-term refinancing operation (LTRO) targeted at businesses.

"In the current situation, the ECB has no other choice than to react," said Mathieu L'Hoir, strategist at AXA Investment Managers, which has 562 billion euros ($764 billion) under management.

"If (ECB President Mario Draghi) doesn't do it you can be absolutely sure the euro will move above the $1.40 mark and will rise well beyond it. The rise in the euro drags down the price of imported goods and creates deflationary pressures."   Continuación...