Tue Jul 31, 2012 4:44am EDT
* FTSEurofirst 300 down 0.1 percent
* UBS, BP sharp fallers after Q2 results
By Tricia Wright
LONDON, July 31 (Reuters) - A three-day rally in European shares ran out of steam on Tuesday, hit by the lack of clear evidence that the European Central Bank will deliver strong action this week to back up its pledge to support the euro.
Expectations that the European Central Bank would start buying Spanish and Italian bonds again after a meeting this Thursday were triggered last week by promises from ECB President Mario Draghi to do "whatever it takes" to defend the euro.
German Chancellor Angela Merkel and French President Francois Hollande have repeated that mantra but many analysts have warned from the start that the ECB may not yet have a clear mandate for bold action from Berlin.
A Reuters poll on Monday showed 19 of 24 euro money market traders believed the ECB would revive its bond-buying programme, but only 10 said the bank would do so on Thursday.
"The tactical PR campaign to support the euro zone has bought ministers some time in a typically thin summer market," Mike McCudden, head of derivatives at Interactive Investor, said.
"But actions do indeed speak louder than words and it's only a matter of time before patience runs out."
The FTSEurofirst 300 was down 0.1 percent at 1,071.80 by 0819 GMT, having soared more than 5 percent in the previous three sessions in a rally sparked by Draghi's pledge.
"Today will probably be a quiet last day of the month. Everybody is waiting for Thursday to see if Draghi can deliver," said Lex van Dam, hedge fund manager at Hampstead Capital, which manages $500 million of assets.
"He'd better pull a big rabbit out of his hat."
Ahead of the ECB meeting, investors were faced with a raft of earningsnews.
UBS topped the FTSEurofirst 300 fallers' list, off 5.5 percent, after reporting a shock slump in profit as a drop in trading pushed its investment bank into the red from the previous quarter and it took a big hit on Facebook's glitch-ridden stock market debut.
Trading volume in UBS was robust, at 56 percent of the 90-day daily average.
Rival Deutsche Bank, which saw second-quarter profit plunge at its investment bank, hit by the euro zone debt crisis, traded 1.3 percent lower.
BP, meanwhile, was left nursing a 3.3 percent fall after delivering the worst of a poor set of quarterly results among top oil companies, slashing $5 billion off the value of U.S. assets and undershooting expectations with its operating result.
BP also saw solid trading volume, at 47 percent of the 90-day daily average.
"BP disappoints widely with its second quarter numbers; even after stripping out major write-downs on U.S. shale gas and the Liberty project in Alaska, these results are a significant miss and are likely to disappoint the market," RBC Capital Markets said in a note.
Of the 44 percent of European companies to have reported so far, 47 percent have missed expectations, according to Thomson Reuters Starmine data.