European stock rally stalls, retailers pressured

* Euro STOXX 50 down 0.1 pct, FTSEurofirst 300 flat

* Analysts see near-term Euro STOXX 50 drop to 3,063

* Spain's Inditex (Madrid: ITX.MC - news) falls on currency concerns

By Tricia Wright

LONDON, Feb 18 (Reuters) - Europe's top shares steadied on Tuesday, held back by retailers, as traders bet the market rally that followed the emerging-market slump had run out of steam.

The euro zone's blue-chip Euro STOXX 50 closed down 0.1 percent at 3,117.44 points, consolidating further after a slight drop in the previous session. The losses followed a rally of nearly 6 percent from early February's lows.

Analysts saw scope for the index to level off, some 2 percent shy of a peak hit in late January, before political and economic concerns in emerging markets took their toll on equities.

"Certainly in the near term it looks like it's getting a little bit tired on the upside," said Barclays Capital analyst Lynnden Branigan, who reckoned on a near-term drop to 3,063, the February 13 low.

The pan-European FTSEurofirst 300 ended flat at 1,337.30 points.

The index rallied off intraday lows after German ZEW sentiment data. Although the release was mixed, the German DAX pared losses after ZEW President Clemens Fuest said a drop in headline sentiment "must not be overstated".

"It's a rather muddled set of numbers. Confidence (BSE: CONFIDE.BO - news) is waning a little bit, but I think Germany is a powerhouse and you shouldn't really be worried about Germany," said Joe Rundle, head of trading at ETX Capital.

Retailers came under pressure, led by Zara owner Inditex , down 4 percent, as investors worried that negative currency effects in emerging markets could weigh on its earnings, set for release on March 19.

On Tuesday, Citi downgraded the stock to "neutral" from "buy". "We have increased our full-year 2014 adverse currency translation impact from -3 percent to -4 percent," it said.

Inditex has increased sales through an aggressive expansion to new markets like Asia and Brazil to tap fast-growing, fashion-hungry middle classes. While that has boosted its sales, it has made it more exposed to currency volatility.

Britain's No. 4 grocer, Wm Morrison Supermarkets fell 1.6 percent to 232.7 pence, with traders citing the impact of a price target cut to 190 pence from 210 pence from JPMorgan.

French retailer Casino (Paris: FR0000125585 - news) bucked the sector's weak trend, up 3.2 percent, after it predicted a rise in sales and profit this year, and said it had seen no signs of slowing demand in its top market of Brazil.

Meanwhile, French engineer Alstom (Paris: FR0010220475 - news) fell 3.8 percent on worries about a possible capital hike after Bouygues (Frankfurt: BYG.F - news) wrote down the value of its stake in Alstom by 1.4 billion euros ($1.92 billion) on Monday. Bouygues (Other OTC: BOUYF - news) fell 1.2 percent.

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