* FTSEurofirst 300 index down 0.2 percent
* ArcelorMittal drags down basic resources shares
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By Harpreet Bhal
LONDON, Oct 26 (Reuters) - European shares retreated on Tuesday with UBS weak after reporting losses at its investment bank, while a muted demand forecast from steelmaker ArcelorMittal put pressure on basic resources firms.
By 1101 GMT, the pan-European FTSEurofirst 300 index of top shares was down 0.2 percent at 1,090.00 points, after rising 0.3 percent on Monday to end near a six-month high.
"Technically, the equity market looks ripe for a bit of profit-taking. The markets are overbought and have been for a while, but the fundamentals suggest the downside is limited," said Mike Lenhoff, chief strategist at Brewin Dolphin.
UBS was among the biggest fallers, down 5.3 percent after Switzerland's largest bank said its investment banking arm made a hird-quarter loss.
Falls in heavyweight basic resources stocks also put pressure on the market, with the world's largest steelmaker ArcelorMittal down 4.9 percent after predicting a weaker than expected fourth quarter due to muted demand, lower prices and higher raw material costs.
The weak outlook also stung shares in peers ThyssenKrupp and Salzgitter, down 2.8 percent and 4.1 percent respectively.
Across Europe, Britain's FTSE 100 fell 0.6 percent, Germany's DAX was down 0.1 percent and France's CAC 40 shed 0.5 percent.
QUANTITATIVE EASING HOPES
The FTSEurofirst 300 has rallied 2.7 percent this month partly on expectations the U.S. Federal Reserve will print more money to spur the economy, with the STOXX Europe 600 basic resources index up 6.6 percent as quantitative easing speculation put pressure on the dollar and boosted metal prices.
However, a lack of uniformity in comments from Fed officials about further quantitative easing have caused jitters.
Kansas City Fed President Thomas Hoenig called for more asset buying by the central bank a "very dangerous gamble" while New York Fed President William Dudley said support will likely be warranted unless economic conditions improve.
"We had a rally since August and now people are waiting to see whether this quantitative easing is going to come through or not. There are still some uncertainties and the (stock) market is going to be rangebound until the meeting of the Fed," said Koen De Leus, strategist at KBC Securities.
Other individual fallers included Cairn Energy, down 6.4 percent after the oil explorer said one of its wells in Greenland did not result in a commercial discovery and another failed to reach target depth before the end of the Arctic drilling season.
Vestas Wind shed 5.1 percent after the wind turbine maker lowered its expectations for the European market in 2011.
On the economic front, credit rating agency Standard & Poor's raised its outlook on Britain's triple-A credit rating to 'stable' from 'negative', saying the government's spending review last week showed its resolve to cut the deficit. ID:nWLA6239
The announcement came in the wake of data showing Britain's economy grew faster than expected in the third quarter, easing fears the recovery was faltering and dimming the chance of more quantitative easing from the Bank of England. (Additional reporting by Atul Prakash; Editing by Dan Lalor)