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European shares retreat; all eyes on Fed

PARIS, Dec 17 (Reuters) - European shares fell in early trade on Tuesday, trimming some of the previous session's gains as investors were kept on edge ahead of a Federal Reserve policy meeting at which the Fed could decide to start trimming its stimulus.

At 0806 GMT, the FTSEurofirst 300 index of top European shares was down 0.4 percent at 1,253.77 points.

The odds still point to no major policy change at this week's Fed meeting. However, recent robust U.S. economic data, combined with last week's breakthrough budget deal in Washington, has sparked some speculation that the U.S. central bank could announce a reduction to its $85-billion a month in bond purchases following its two-day meeting on Wednesday.

The data has triggered a bout of profit taking on stocks, which have strongly benefited from the Fed's massive liquidity injection. The FTSEurofirst 300, which was up 15 percent on the year at the end of November, has dropped about 4.2 percent since then.

The benchmark index gained 1.3 percent on Monday in what traders described as a short-covering rally following the sharp two-week slide.

CGG was one of the top losers in Europe on Tuesday, sinking 10 percent in massive volumes after the French oil industry seismic surveying firm slashed its profit target.