European shares end steady, gain for 4th straight quarter

* FTSEurofirst 300 index closes 0.05 pct lower

* Solvay (Brussels: SOLB.BR - news) boosts European chemicals sector

* easyJet falls on rating downgrade

* Espirito Santo extends Friday's steep losses

By Atul Prakash

LONDON, June 30 (Reuters) - European equities steadied on Monday, as gains in chemicals companies led by the Belgian group Solvay were offset by weaker travel stocks after a ratings downgrade caused easyJet shares to slump.

Portugal's Banco Espirito Santo also slumped 16.5 percent, extending an 11.4 percent fall on Friday. Luxembourg's justice authorities began an investigation into three holding companies of the Espirito Santo banking family over alleged breaches of company law.

European chemicals shares rose 0.6 percent, boosted by Solvay. Analysts at Exane, the top-ranked broker on the stock according to StarMine, upgraded its rating to "outperform" from "neutral". Solvay shares rose 3.6 percent.

The broader market was also supported by Dutch conglomerate Philips (Amsterdam: PHIA.AS - news) , which rose 4.1 percent after saying it would merge its Lumileds LED components and automotive lighting divisions into a standalone subsidiary that could be spun off.

But the gains were eclipsed by a 0.6 percent fall in the European travel and leisure index, as easyJet slumped 6.4 percent. The drop came after a rating cut by Bank of America Merrill Lynch to "underperform" from "neutral".

The FTSEurofirst 300 index of top European shares ended 0.05 percent lower at 1,370.60 points after moving in and out of positive territory during the day. It still recorded a fourth straight quarter of gains, and analysts said the market's longer-term outlook remained positive.

"We still think that equities will outperform other asset classes given where valuations are at the moment," said Henk Potts, equity strategist at Barclays Wealth and Investment Management. "We believe that developed market equities offer a better opportunity than emerging-market equities."

A Reuters poll released last week showed that investors are bullish on the outlook for European shares in the second half of the year, betting they will extend their rally with the help of European Central Bank s stimulus measures.

The market came under some pressure when Banco Espirito Santo's shares dropped after a conference call by the bank, analysts said.

"It was a very short call and little new information. I guess the main thing causing the fall is that uncertainty will go on for another month until the general assembly that will decide on new leadership at BES," said Albino Oliveira, an analyst at Fincor brokers.

And Italy's fourth-biggest lender, Banco Popolare (Frankfurt: B8ZB.F - news) , fell 3.1 percent after Chief Executive Pier Francesco Saviotti told a newspaper the bank had cancelled the sale of its bad debt unit for now. He said it would look at merger opportunities once it had passed a Europe-wide health check of the sector.

"The market doesn't like this kind of news ahead of the upcoming stress test. If a bank is not able to find a buyer at the desired price, this leaves investors guessing about the quality of assets and whether further writedowns are necessary," said Gerhard Schwarz, head of equity strategy at Baader Bank (Xetra: BWB.DE - news) .

"The banking sector in general suffers from the lack of cyclical appetite investors currently have. The recent somewhat weaker economic numbers in Europe also cast some doubts that this recovery has a strong momentum. Banks are still suffering from structural weakness in their profitability."

The European banking index was down 0.7 percent.

Europe bourses in 2014: http://link.reuters.com/pap87v

Asset performance in 2014: http://link.reuters.com/gap87v

Today's European research round-up (Additional reporting by Andrei Khalip in Lisbon and Blaise Robinson in Paris; Editing by Larry King)