By William L. Watts, MarketWatch

FRANKFURT (MarketWatch) -- European shares traded lower Friday as U.S. consumer confidence dipped and euro-zone finance ministers prepared to discuss a bailout for Cyprus, but remained on track for a weekly gain a day after pressing to their highest level in more than 41/2 years.

The Stoxx 600 Europe index fell 0.4% to close at 297.46. The index on Thursday closed at its highest level since June 2008. The pan-European index saw a 0.7% weekly gain and remains up 2.6% since the beginning of March.

The setback appeared to stem mainly from traders booking profits after the push to nearly five-year highs, with little to suggest the long-term risk rally was endangered, said Ishaq Siddiqi, market strategist at ETX Capital in London.

Volume remained light with little in the way of fresh European economic data or company news.

A weaker-than-expected reading on U.S. consumer sentiment helped keep equities under pressure in afternoon trade, analysts said. The University of Michigan-Thomson Reuters consumer-sentiment gauge dropped to a 71.8 in a preliminary March reaching from a final February level of 77.6. Economists had forecast a rise to 78.

U.S. stocks retreated, with the S&P 500 slipping after finishing Thursday within 2 points of its record close, while a 10-day win streak for the Dow Jones Industrial Average was in danger of coming to an end.

Shares of Bouygues SA rose 2.1% in Paris after France's telecom regulator late Thursday said the country's No. 3 mobile phone company could use a part of the radio spectrum for a new ultra-high-speed service.

Shares of Vivendi SA lost 3.3%. The company on Thursday reportedly said it had scrapped the sale of its Brazilian telecommunications operator.

The French CAC 40 stock index fell 0.7% to 3,844.03.

Shares of Volkswagen AG fell 2.6%. News reports said Deutsche Bank placed 5.8 million preferred shares of Volkswagen.

The German DAX index slipped 0.2% to 8,042.85.

London'sFTSE 100 stock index shed 0.6% to finish at 6,489.65.

Royal Dutch Shell PLC (RDSA)(RDSB) fell 1.4% after being downgraded to underweight from neutral by analysts at J.P. Morgan Chase. They cited concerns about growth, potential capital requirements, and the implications for near-term cash return.

Other oil firms also lost ground, with Total SA down 1% in Paris.

Miners were also under pressure, with BHP Billiton PLC down 1.5%

Euro-zone finance ministers were set to to discuss a Cyprus bailout late Friday.

Also Friday, members of Italy's parliament took their seats for the first time since the country's Feb. 24-25 election. Efforts to form a new government are expected to continue in coming weeks.

Meanwhile, discussions about Cyprus could prove thorny, with European politicians reluctant to back a bailout without significant concessions.

Strategists say Italy's unsettled political situation could also prove to be a source of heartburn if the inability to form a durable government delays efforts to overhaul economic rules and address the country's fiscal woes. See: Italian politics, Russian oligarchs threaten calm.

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