European shares edge down; focus on economic data

* FTSEurofirst 300 sheds 0.2 percent

* German ZEW index disappoints; U.S. retail sales awaited

* Banks among decliners, reversing previous sessions gains

* For up-to-the-minute market news, click on [STXNEWS/EU]

By Harpreet Bhal

LONDON, Sept 14 (Reuters) - European shares retreated on Tuesday, as disappointing economic data from Germany heightened jitters over the pace of recovery, with investors awaiting data from the U.S. for further evidence on the health of the economy.

Germany's ZEW sentiment index for September fell to minus 4.3 points, from 14 points in August. Investors had expected a fall to 10 points. [ID:nDEP003349]

By 0909 GMT, the pan-European FTSEurofirst 300 <.FTEU3> index of top shares fell 0.2 percent to 1,085.66 points, in a choppy session after closing on Monday at its highest level since late April.

The FTSEurofirst 300 had rallied almost uninterruptedly in the past three weeks and is up nearly 5.7 percent this month, on track to post its best monthly gain since March.

Banking shares were lower, with the STOXX Europe 600 banking index <.SX7P> down 0.2 percent, reversing the previous session's gains when the sector rallied on relief that the Basel III bank capital rules were not as tough as feared.

Credit Suisse's chief executive told a Swiss newspaper that the lender does not need a capital hike to fulfil new global bank rules and does not foresee significant changes to its dividend and growth policy. [ID:nLDE68D06G] The stock was down 0.4 percent.

Investor's attention is likely to focus on further economic data, including U.S., retail sales data for August is due at 1230 GMT.

Analysts said the data will be watched closely due to some expectations in recent weeks of a brightening economic outlook for the world's largest economy after U.S. private payrolls and manufacturing growth in August exceeded market expectations.

"These indicators are key and if they surprise on the upside the stock market rally could go further but if they disappoint then we might have a revision downwards not only for the economy but for company profits as well," said Koen de Leus, strategist at KBC Securities.

Adding to the cautious view on economic recovery, house prices in England and Wales suffered their most widespread falls since May 2009 last month, while consumer price inflation held steady in August. [ID:nSLADKE6CK] [ID:nAHLDKE66R]

SUEZ ENVIRONMENT GAINS

Broker notes helped provide some direction for individual stocks, with Suez Environment among the top gainers after Morgan Stanley upgraded its recommendation on the environmental services company to "overweight" from "neutral". The stock rose 1.9 percent.

On the downside, Philips fell 2.3 percent after the Dutch electronics company unveiled growth targets which analysts said were not ambitious. [ID:nLDE68D09V]

Fashion chain Next shed 1.3 percent as Societe Generale cut its rating on the firm to "sell" from "hold" ahead of H1 results on Wednesday.

Across Europe, Britain's FTSE 100 <.FTSE>, Germany's DAX <.GDAXI> and France's CAC 40 <.FCHI> were down 0.1 to 0.2 percent. (Editing by Hans Peters)