European stocks below five-year highs on U.S. concerns
* FTSEurofirst 300 down 0.4 pct
* Euro zone, German PMIs show economy healing
* SocGen recommends selling German stocks after election
LONDON, Sept 23 (Reuters) - European shares held below five-year highs on Monday, as solid euro zone data and Angela Merkel's landslide personal victory in Germany's election were counterbalanced by concerns about U.S. fiscal and monetary policy.
Market jubilance at the Federal Reserve's decision last week to delay withdrawing monetary stimulus was tempered after St Louis Federal Reserve President James Bullard said on Friday the U.S. central bank could begin to rein in its bond-buying as soon as October if data allowed.
Investors are also focusing more closely on the fiscal problems of the world's biggest economy. Failure to make a budget deal by the end of September risks a federal government shutdown, and a default is possible if lawmakers do not vote to raise the debt ceiling by mid-October.
Market losses were limited by the widespread expectation that some kind of solution will be found. The FTSEurofirst 300 was down 0.4 percent at 1,257.97 points by 1347 GMT, holding below last week's five-year high of 1,274.59.
"The trigger for some (equities) downside can come from either a potential U.S. government shutdown or hesitation about the U.S. debt ceiling," said Peter Garnry, strategist at Saxo Bank. "There will be market turmoil, but in the end ... they will find a solution. I don't think they can afford to be blamed yet again for causing a drop in sentiment."
Strong euro zone manufacturing PMI surveys also helped limit equity weakness. Signs the economy is healing are drawing investors into Europe, with funds focused on the region recording their largest weekly inflows in more than two years, according to EPFR data.
"Attractive valuation, improved euro zone macro data and positive earnings revision leave plenty of upside room for the value side in Europe," said Nicolas Simar, a fund manager at ING Investment Management.
Analysts at Societe Generale also recommended investing in so-called value stocks - which are cheap relative to the market and traditionally catch-up during bull runs. Regionally, they favour the French CAC 40 over the DAX, a view they say is reinforced by the German election results.
Angela Merkel's conservatives notched up their best election result in two decades, but fell short of an absolute majority and must now seek to forge a new coalition.
"The result of the election should not be a big market mover in the short term as it was largely as expected ... But the mid-term market implications loom large," SocGen said in a note, forecasting that a continuation of recent policies could push up inflation and erode competitiveness.
"We are aggressive sellers of German assets post the election. They should underperform other euro zone assets over the next quarters."
Germany's DAX was down 0.5 percent at 8,632.10 points, after hitting all-time highs last week.
Deutsche Post, off 3.5 percent, was among the top fallers in Europe, hit by profit-taking after a 44 percent rally this year, which culminating in its accession on Monday to the EuroSTOXX 50 index of euro zone blue chips.