* Investors take profit after Fed-inspired rally
* Volatility lifted by options, futures expiries
* Broker downgrade weighs on French broadcaster TF1
* Stoxx 600 index seen up 13 pct by end-2016 - strategist (Adds details, updates shares)
By Danilo Masoni and Sudip Kar-Gupta
MILAN/LONDON, Dec 18 (Reuters) - European shares fell in volatile trade on Friday as the Fed-inspired rally of the previous session ran out of steam and investors took profits ahead of the holiday season.
The pan-European FTSEurofirst 300 index was down 1.2 percent by 1540 GMT, after gaining 1.3 percent on Thursday, while the euro zone’s blue-chip Euro STOXX 50 index weakened 1.7 percent.
European stocks had rallied on Thursday as investors took the U.S. Federal Reserve’s decision to raise interest rates as a sign of confidence in the world’s biggest economy.
“Yesterday’s rally was a bit overdone and investors are taking profit as they prepare for the holiday. Lower oil prices this morning and weaker U.S. markets gave the pretext to sell,” said Stephan Rieke, senior economist at BHF-BANK in Frankfurt.
“Looking forward, I expect volatility to persist in the coming sessions but the market could gain some strength as we move into 2016,” he added.
The FTSEurofirst 300 index is up around 4 percent this year, but down 14 percent from its peak, reached in April. Economic stimulus measures from the European Central Bank have helped underpin European stock markets this year and are expected to continue in 2016.
Equity strategists expect stocks to rise next year, helped by a weaker euro, accommodative monetary policy and better economic growth. Europe’s Stoxx 600 index is seen gaining 13 percent by end-2016, said Market Securities chief European strategist Stephane Ekolo in a note.
French TV company TF1 was among the worst performers, declining by 3.9 percent after brokerage Kepler Cheuvreux cut its rating on the stock to “reduce” from “buy”.
Shares in French company Casino stabilised to ease 0.16 percent. On Thursday the stock fell 11.5 percent after research firm Muddy Waters said it was one of the “most overvalued and misunderstood” companies it had come across.
Casino said on Thursday the report contained “grossly erroneous allegations” that the group would answer in detail. JP Morgan Cazenove analysts said they strongly disagreed with Muddy Waters’ comments.
Danish oil and shipping group Maersk fell more than 3 percent, as freight prices dropped and after Danske Bank downgraded the stock to “hold”, citing the fall in oil prices and the negative effects on its container businesses.
Trading was volatile due to options and futures expiries. “The market was dominated by quadruple witching and this along with index rebalancing has lifted volumes and volatility,” said Frank Schneider, trader and analyst at Alpha Wertpapierhandels.
Today’s European research round-up (Reporting by Danilo Masoni; Editing by Mark Trevelyan)