Europe stocks fall, eyes on ECB and payroll data

* FTSEurofirst 300 falls 0.97 pct

* Investors await ECB rate decision; US jobs

* Steel producers, energy stocks weigh

By Patrizia Kokot

LONDON, July 3 (Reuters) - European shares were down in midday trade on Thursday, with investors eyeing the release of U.S. payroll data as well as the interest rate setting decision by the European Central Bank.

By 1051 GMT, the FTSEurofirst 300 index .FTEU3 of top European shares fell 0.96 percent to 1,157.41, led lower by steel and energy stocks.

Steel maker SSAB (SSABa.ST: Quote, Profile, Research, Stock Buzz) slumped 8.7 percent and ArcelorMittal (MTP.PA: Quote, Profile, Research, Stock Buzz) (ISPA.AS: Quote, Profile, Research, Stock Buzz) fell 4 percent with ThyssenKrupp (TKAG.DE: Quote, Profile, Research, Stock Buzz) down 2.3 percent amid speculation that the price of steel is nearing a peak due to a slowdown in the global economy.

"The rate of growth in steel consumption outside of China has declined to close to nothing," analyst Alan Coats at HSBC said, adding he expects steel prices to fall to $900 a metric tonne by the first quarter of 2009 from a peak of $1,200 per metric tonne in the third quarter of 2008.

Around Europe, Britain's FTSE .FTSE lost 0.6 percent, Germany's DAX .GDAXI fell 0.7 percent and France's CAC .FCHI declined 0.6 percent.

Investors stuck to the sidelines ahead of the ECB's policy decision at 1145 GMT.

While markets have priced in a 25 basis point rise to 4.25 percent, some economists voiced concern that a 50 basis points was a possibility.

"Fifty would be a shock," market strategist Bernard McAlinden at NCB Stockbrokers said, adding that a 25 basis point rise would already be quite difficult for the market to digest.

"The accelerated strength in oil destroys business and consumer confidence and therefore weakens the outlook for growth," he said, noting that a rise in interest rates would "only add to the gloom".

"What the ECB is worried about is that it moves from oil to the labour market and then inflation becomes systemic and (turns into) a wage-price spiral," he added, adding that the question remains whether or not wage inflation is picking up in times of a more globalised labour market.

Although crude oil futures CLc1 held above $145 a barrel, oil and gas shares were among the largest negative weights on the broader market.  Continued...