* FTSEurofirst 300 ends down 1.2 pct
* Pulls back after Tuesday's biggest 1-day gain in 16 mths
* Market seeks clarity over debt crisis
By Simon Jessop
LONDON, Sept 28 (Reuters) - European shares snapped a three-day winning streak on Wednesday as hopes for imminent political action to contain the region's debt crisis were capped by a lack of detail, leaving equities on course to rack up a fifth straight month of losses.
Given the scale of recent gains, however -- more than 7 percent -- the pullback was relatively muted and in low volume that showed a lack of willingness among some investors to take aggressive positions ahead of quarter-end, traders said.
Financial services led fallers across the region after hedge fund Man Group , down 25 percent in heavy volume more than four and a half times its 90-day average, reported large outflows over the summer.
Adding to the sector's woes were proposals for a financial
transaction tax from the European Commission, whose plan for a
0.1 percent tax on stock and bond trades hit exchanges such as
Deutsche Boerse
Elsewhere, the downwards move was led by a fresh slide in commodities and commodity stocks such as Antofagasta , down 5.9 percent, and BHP Billiton , down 4.1 percent, on persistent concern about the growth outlook.
For the broader market the focus remains firmly on the twin macroeconomic headwinds of slowing economic growth and the euro zone debt crisis.
International auditors returned to Greece as Athens looks to secure the funds needed to avoid a near-term default, which Germany said is needed before any fresh talks over Greece's second bailout package.
"The uncertainty is huge in the complex political process we're seeing played out," said Peter Sullivan, head of equity strategy for the United States and Europe at HSBC, who recommends a focus on high-yield stocks to counter that uncertainty.
Key to the recent gains has been a belief politicians will boost the region's bailout fund past the 440 billion euros level agreed in July -- even though this has yet to be signed off by national parliaments, including in Germany.
While there was no simple, smooth path out of the crisis, "the debate has now moved to 'how big does a rescue fund have to be?', where the week before it wasn't even being discussed. So although we have no concrete news, I think the debate has moved to a more optimistic outlook," Sullivan said.
A London-based portfolio trader at a U.S. investment bank said the market had started to "discount away the potential for a downwards 10 to 15 percent move because of (any) default of Greece.
LESS LIKELY
"The (political) rhetoric coming out seems to have appeased concerns about that potential outcome. People are less nervous. Not to say it can't happen, but people believe it as a less likely outcome," the trader added.
By the close, the FTSEurofirst 300 index of leading European shares was down 1.2 percent at 927.28 points, after adding 4.5 percent in the previous session. It remains down 4.1 percent in September and 17.3 percent in 2011.
Volumes were low, however, at 84 percent of their 90-day daily average.
In yet another choppy session, defensive sectors and "quality" stocks were the main winners, along with some periphery-exposed banking stocks that have been heavily sold off recently.
Best off in the broad market retreat from risk were defensive sectors including healthcare , telecoms and utilities , all of which outperformed.
"The interesting thing is the continuous purchase of quality. Throughout this move up and move down, quality stocks continue to outperform, and a lot of defensive stocks actually screen well for quality, whether it's earnings quality, dividend yield etc," the portfolio trader said.
Alternatively, a short-term tactical trade based on earnings revisions was another good option, said HSBC's Sullivan, as "earnings downgrades are like the cockroach theory, in that there's never just one".
Didier Duret, global chief investment officer of ABN AMRO Private Banking, which manages 170 billion euros, was more optimistic.
"We are one of the rare birds to have equities on an slight 'overweight' since mid-August. The rationale is grounded on the fact that the risk of global recession is overstated by the financial markets," he said.
One key bet is the materials sector, which has been heavily sold off on the recession fears, but which could bounce sharply, while Duret also liked consumer staples for their cashflow qualities, along with high-dividend stocks such as GDF Suez , Vodafone and Sanofi . (Additional reporting by Atul Prakash; Editing by David Holmes)
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