* FTSEurofirst 300 down 0.4 pct, slips from 7-year high
* Strong negative correlation between euro and European stocks
* DAX set for longest streak of weekly gains since 1998
By Blaise Robinson and Francesco Canepa
PARIS/LONDON, March 13 (Reuters) - European stocks were slightly down around midday on Friday, taking a breather from their almost-uninterrupted rally since the start of the year, with energy and mining shares falling along with commodity prices.
Resource-related shares led the retreat, with French oil major Total down 2 percent and global miner Rio Tinto down 0.8 percent.
Spain’s Sabadell fell for second day, after a source told Reuters the bank was considering a 1.5 billion euro capital hike via a share issue to fund a bid for Britain’s TSB , which was announced on Thursday.
Commerzbank surged 3.8 percent, with traders citing relief that a U.S. fine announced the previous day was in line with market expectations.
Following the recent sharp drop in the euro currency which has helped fuel the rally in the region’s stocks, investors were wary of a potential technical bounce in the euro in the coming days which could trigger a bout of profit-taking in equities.
“European stocks are driven by the forex market, big time,” said Nicolas Cheron, market analyst at FXCM in Paris.
“The drop in the euro has played a major role in the stock rally in Europe in the past few months even before quantitative easing was launched, and now, with short positions on the euro reaching extreme levels in the short term, European stocks look vulnerable to a pull-back if the currency bounces.”
The euro rose on Thursday, rebounding off 12-year lows against the dollar, although the single currency was back on the defensive on Friday.
At 1215 GMT, the FTSEurofirst 300 index of top European shares was down 0.2 percent at 1,571.47 points.
Germany’s DAX, up 20 percent so far this year, also slipped 0.2 percent on Friday. The index was still up around 2 percent on the week, set for its ninth consecutive weekly gain, its longest winning streak in 17 years.
“So much of the positives on the European market is in the price,” Paul Chesterton, a senior trader at Peregrine & Black, said. “I can’t help feeling it’s looking a bit stretched here.”
European stocks have strongly outperforming Wall Street so far in 2015, helped by the European Central Bank’s bond-buying programme which has been driving the euro lower and prompted global investors to increase their exposure to European stocks.
According to Bank of America Merrill Lynch Global Research, European equity funds have enjoyed $36 billion in inflows so far this year, while U.S. equity funds have experienced redemptions of $47 billion over the same period.
Europe bourses in 2015: link.reuters.com/pap87v
Asset performance in 2015: link.reuters.com/gap87v
Today’s European research round-up
Editing by Andrew Heavens