European stocks were down 0.5 percent around midday on Thursday, in their first broad retreat this year, as investors booked recent lofty gains ahead of Friday's U.S. jobs data.
Stocks didn't react after the Bank of England kept the scale of its asset purchase programme unchanged at 200 billion pounds ($319 billion) and left interest rates at 0.5 percent as expected.
"Looking ahead the Bank (BoE) has to face up to the issue of electoral uncertainty and the fact that if re-elected, Labour will keep spending and not attack the deficit until 2011, whereas the Conservatives want to start in 2010," said Stephen Pope, chief global equity strategist at Cantor Fitzgerald.
"There really is little point in discussing when the Bank will raise rates as the simple truth is that the UK economy is in a poor state."
At 1210 GMT, the FTSEurofirst 300 index of top European shares was down 0.5 percent at 1,056.12 points, falling from a 15-month closing high reached in the previous session.
Banking stocks, among the top gainers in 2009, lost ground on Thursday, with UBS down 1.2 percent, Credit Agricole down 1.4 percent and HSBC down 1 percent.
Investors eagerly awaited U.S. non-farm payrolls figures for December, due on Friday, that could give insight on the outlook for interest rates and the Federal Reserve's exit strategy from the extraordinary measures it has taken to boost liquidity.
"It's a fine line between weak numbers that would revive doubts over the pace of the recovery, and surprisingly strong numbers, which would raise fears of early interest rate hikes," said Valerie Plagnol, chief strategist at CM-CIC Securities, in Paris.
"But overall, the market has recently made spectacular gains, so we shouldn't be reading too much into today's dip. Some people are just taking profits."
Earlier on Thursday, China's key stock index fell 1.9 percent after the country's central bank surprised the market by raising the auction yield of its three-month bills, a move seen as a significant step-up in liquidity tightening.
European mining shares dropped, with Rio Tinto down 1 percent and Xstrata down 1.4 percent, falling along with metal prices such as copper, which were down as the dollar strengthened and caution set in ahead of U.S. payrolls data and as traders worried about possible monetary tightening in China.
Around Europe, UK's FTSE 100 index was down 0.2 percent, Germany's DAX index was down 0.7 percent and France's CAC 40 down 0.3 percent.
SAINSBURY, ASTRAZENECA ON DEMAND
J Sainsbury rose 2 percent as the supermarket reported better-than-forecast third-quarter underlying sales figures.
AstraZeneca gained 1.1 percent after it settled a U.S. patent row over Nexium with Israel's Teva Pharmaceuticals, protecting the drugmaker's top-selling heartburn drug from immediate generic competition.
Adecco, the world's largest staffing company, gained 1.9 percent after Credit Suisse started coverage of the stock with an "outperform" rating.
French advertising groups Havas and JCDecaux surged 5.5 percent and 4.5 percent, respectively, boosted by rating upgrades from Goldman Sachs in a broad note on the European media sector.
