UPDATE 1-European stock rally stalls, retailers pressured
* FTSEurofirst 300 off 0.1 pct, Euro STOXX 50 down 0.2 pct
* Analysts see near-term Euro STOXX 50 drop to 3,063
* Spain's Inditex falls on currency concerns
LONDON, Feb 18 (Reuters) - Europe's top shares inched lower on Tuesday, weighed down by retailers, as analysts bet the rally that followed the emerging-market slump has now run out of steam.
The euro zone's blue-chip Euro STOXX 50 was down 0.2 percent at 3,112.81 points by 1559 GMT, consolidating further after a slight drop in the previous session. The losses followed a rally of near 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 was 0.1 percent lower at 1,335.20 points, down for only the second time in 10 sessions.
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 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 4.1 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. That has boosted its sales but made it more exposed to currency volatility.
Britain's No. 4 grocer, Wm Morrison Supermarkets fell 1.6 percent to 232.6 pence, with traders citing the impact of a price target cut to 190 pence from 210 pence from JPMorgan.
French retailer Casino bucked the sector's weak trend, up 2.7 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 fell 3.7 percent on worries about a possible capital hike after Bouygues wrote down the value of its stake in Alstom by 1.4 billion euros ($1.92 billion) on Monday. Bouygues fell 1.8 percent.
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