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European shares retreat from multi-year highs as US debt ceiling looms

* FTSEurofirst 300 falls 0.5 pct, ESTOXX 50 dips 0.4 pct

* US debt ceiling situation pushes equities off highs

* DAX rose to record high in previous session

* LVMH fall hits luxury goods stocks

* Most Investors still expect eventual U.S. debt/budget deal

By Sudip Kar-Gupta

LONDON, Oct 16 (Reuters) - European shares retreated from multi-year highs on Wednesday as uncertainty over the U.S. debt ceiling caused some traders to trim equity holdings, while LVMH's slower sales growth hit luxury goods stocks.

Although the majority of investors still expected U.S. lawmakers to eventually reach a deal over the United States' debt ceiling and its budget stalemate, some said equity markets would be vulnerable to minor sell-offs until an agreement was secured.

"If we haven't heard anything by late afternoon, we'll be moving south," said Berkeley Futures associate director Richard Griffiths.

The pan-European FTSEurofirst 300 index fell 0.5 percent to 1,256.74 points in mid-session trade, after having risen 0.9 percent in the previous session.

The euro zone's blue-chip Euro STOXX 50 index, which rose to a fresh 2-1/2 year high on Tuesday, fell 0.4 percent to 3,001.02 points.

Germany's DAX, which hit a fresh record high of 8,820.98 points on Tuesday, slipped 0.2 percent to 8,787.23 points.

The STOXX Europe 600 Personal & Household Goods Index ., which comprises major luxury goods stocks, fell 1.9 percent to make it the worst-performing equity sector as it bore the brunt of a 6.1 percent drop in France's LVMH.

LVMH fell after reporting an unexpected slowdown in sales growth at its fashion and leather business.

"Until we get some clarity on global growth and the real demand for luxury goods in China, there's good reason to be cautious over these luxury retail stocks," said CMC Markets senior sales trader Matt Basi.


U.S. DEADLOCK

The FTSEurofirst 300 index remains up 11 percent since the start of 2013 while the Euro STOXX 50 is up 14 percent, but equity markets have slipped back in October after the U.S. government was partially shut down this month following disagreement among politicians over the country's budget.

This in turn has led to concerns over the country's $16.7 trillion debt ceiling, which U.S. Treasury Secretary Jack Lew said the government would hit no later than Oct. 17.

"There's cautious optimism. Nobody really expects the U.S to effectively shoot itself in the foot," said XBZ European equity options broker Mike Turner.

"The Euro STOXX 50 is channeling recent highs and even if we do slip 50 points if there's no immediate deal, we'd only be easing out of what is still a bull phase," he added.

Darren Courtney-Cook, head of trading at Central Markets Investment Management, also backed using any market decline caused by the U.S. debt situation to buy up stocks.

"They may extend it for a few months and kick the can down the road, but the market remains bullish, it's still 'buy on the dips'," he said.