* FTSEurofirst 300 index little changed
* Solvay boosts European chemicals sector
* easyJet falls on rating downgrade
By Atul Prakash
LONDON, June 30 (Reuters) - European equities steadied in afternoon trading on Monday, with gains in chemicals shares, led by Belgian group Solvay, offset by weaker travel and leisure stocks after easyJet slumped following a rating downgrade.
European chemicals shares rose 0.9 percent, the top sectoral gainer in Europe, supported by Solvay after analysts at Exane, the top-ranked broker on the stock according to StarMine, upgraded their rating to "outperform" from "neutral". Solvay shares rose 3.8 percent.
The broader market was also supported by Dutch conglomerate Philips, which rose 4.3 percent after saying it will merge its Lumileds LED components and automotive lighting divisions into a standalone subsidiary that could potentially be spun off.
However, gains were eclipsed by a 0.9 percent fall in travel and leisure index, pressured by easyJet that slumped 6.6 percent, with traders citing a rating cut by Bank of America Merrill Lynch to "underperform" from "neutral".
The FTSEurofirst 300 index of top European shares was down 0.1 percent to 1,369.42 points by 1501 GMT after moving in and out of positive territory during the day. However, it headed for a fourth straight quarter of gains and analysts said the longer-term outlook remained positive.
"We still think that equities will outperform other asset classes given where valuations are at the moment. We believe that developed market equities offer a better opportunity than emerging market equities," Henk Potts, equity strategist at Barclays Wealth and Investment Management, said.
A Reuters poll released last week showed that investors are bullish on the outlook for European shares in the second half of the year, betting on them extending their rally, helped by the ECB's stimulus measures.
The broader stock market came under some pressure following a 3.5 percent fall in Italy's fourth-biggest lender Banco Popolare after its CEO Pier Francesco Saviotti told a newspaper the bank had cancelled the sale of its bad debt unit for now and it would look at merger opportunities once it had passed a Europe-wide health check of the sector.
"The market doesn't like this kind of news ahead of the upcoming stress test. If a bank is not able to find a buyer at the desired price, this leaves investors guessing about the quality of assets and whether further writedowns are necessary," Gerhard Schwarz, head of equity strategy at Baader Bank, said.
"The banking sector in general suffers from the lack of cyclical appetite investors currently have. The recent somewhat weaker economic numbers in Europe also cast some doubts that this recovery has a strong momentum. Banks are still suffering from structural weakness in their profitability."
The European banking index was down 0.7 percent.
European stocks have risen sharply since mid-March, boosted by expectations of support from new stimulus measures from the European Central Bank (ECB), but retreated last week after downbeat U.S. growth data and worries over violence in Iraq.
Last week was also marked by investment outflows, with European equity funds seeing redemptions of $1.6 billion, their biggest outflows in over a year, according to data from BofA Merrill Lynch Global Research.
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 Blaise Robinson in Paris; Editing by Toby Chopra)