* European equity markets retreat from earlier highs
* FTSEurofirst 300 falls 0.3 pct, Euro STOXX 50 slips 0.1 pct
* Investors express caution ahead of U.S data on Friday
* Miners fall as copper price weakens
* Spanish and Italian stock markets underperform
By Sudip Kar-Gupta
LONDON, March 6 (Reuters) - European shares fell on Wednesday as investors booked profits on a rally that had sent several markets to multi-year highs, with weakness in the mining sector after metals prices declined also weighing on equities.
Traders said European equity markets may be rangebound towards the end of the week, ahead of key data that could provide clues on the extent to which central banks will continue with stimulus measures to support the global economy.
However, they added that the longer-term outlook for equities remained positive, although markets may only rise at a slow pace over the course of March and April.
The pan-European FTSEurofirst 300 index closed down 0.3 percent at 1,185.95 points, falling back after at one stage rising by 0.4 percent to a 4-1/2 year intraday high of 1,193.35 points.
The euro zone's blue-chip Euro STOXX 50 index also retreated 0.1 percent to 2,679.89 points.
The Euro STOXX 50's decline pushed the index down close to its 50-day simple moving average level of around 2,670 points, and falling below that level could be taken as a sign to sell in the near-term by traders who use technical analysis.
The FTSEurofirst 300 has risen 5 percent since the start of 2013, while the Euro STOXX 50 has risen some 2 percent.
Institutional investors said they would rather err on the side of caution by selling out for a profit at current levels, rather than add to equities at present given the risks of a near-term minor pull-back.
"I've been booking some profits across the board but I've been sitting on the fence this week," said Caroline Vincent, European equities fund manager at Cavendish Asset Management.
Berkeley Futures associate director Richard Griffiths said some traders were selling ahead of the publication of U.S. non-farm payroll data on Friday, on expectations that those figures would fail to beat market forecasts.
Griffiths said expectations of a strong U.S. non-farm payroll number on Friday had already been factored into equity markets, and that a number that failed to beat forecasts could push down shares.
City Index strategist Joshua Raymond said equity markets could be volatile ahead of the publication of such data.
"It's fairly choppy...there's a lot of data out over the next couple of days that's going to be very important for the near-term path of the market, whether stimulus buttons still remain on, or whether there's more of a question mark on that," said Raymond.
SPAIN AND ITALY UNDERPERFORM
A fall in the price of copper pushed down heavyweight mining stocks, with the STOXX Europe 600 Basic Resources Index - which includes mining companies - declining 1.4 percent to make it Europe's worst-performing equity sector.
The so-called "peripheral" southern European stock markets of Spain and Italy, which have been hit hard by the euro zone's debt crisis and an election stalemate in Rome, also underperformed with Spain's IBEX down 0.8 percent while Italy's FTSE MIB fell 0.5 percent.
Rupert Baker, European equity sales executive at Mirabaud Securities, said worries over Italy could temper gains on European equities in the near-term, although he expected European stock markets to grind slowly higher.
"My institutional clients, as far as I can see, have been more tempted to sell into this market than buy, but March looks OK," said Baker.
Central Markets senior broker Joe Neighbour said the fact that European stock markets had earlier reached those fresh peaks had been a cue for some to sell out at a profit to others looking to catch up on that rally.
"With the psychology of people, when everybody hears that the market is at new highs, the smarter money starts to shift out and makes a profit by selling to people who are looking to get in," said Neighbour.