European shares retreat before German court, Fed

European equities eased on Tuesday, with investors taking profits on a rally to 13-month highs on concerns about the strings that Germany may attach to the euro zone bailout fund and the chance the U.S. may not deliver widely-awaited stimulus.

The German Constitutional Court is expected to approve the European Stability Mechanism on Wednesday. But the devil will be in the detail - any conditions to limit Berlin's flexibility on future rescues may lead to a delay in the European Central Bank's new bond buying programme, which investors had cheered last week as a step to bring down sovereign borrowing costs and tackle the euro zone crisis.

Uncertainty also hangs over the U.S. Federal Reserve's policy decision, due on Thursday. Markets are priced for fresh stimulus while economists give only a 60 percent chance of a third round of quantitative easing coming as soon as this week.

"There is a broad consensus that the (equities) rally has really discounted all the good news that could come in the next couple of weeks and the risks are really skewed to the downside," said Peter Garnry, equities strategist at Saxo Bank.

The FTSEurofirst 300 was down 0.3 percent at 1,099.68 points by 0702 GMT, retreating from a 13-month high of 1,113.22 set at the end of last week.