European stocks flat as banks falls offset travel and leisure gains



* Fed, ECB reassurances support sentiment

* M&S hits 1-year high on profit recovery forecast

* Danone slips on Berenberg downgrade

By Sruthi Shankar and Shreyashi Sanyal

May 26 (Reuters) - European stocks ended flat on Wednesday, led by bank shares after central bank policymakers pledged to keep monetary policy loose despite recent signs of an uptick in inflation.

The pan-European STOXX 600 index .STOXX was flat, with bank .SX7P falls offsetting travel and leisure .SXTP gains.

Stocks drifted higher earlier, holding near record highs after U.S. Federal Reserve officials reaffirmed a dovish monetary policy stance.

Similar comments from European Central Bank policymakers, including that it may be too early to discuss tapering of emergency bond purchases, helped equity markets in the region stabilize.

But banking stocks came under pressure as a result.

"Investors appear to be fairly content with the outlook for policy, and inflation concerns have certainly receded for the time being," said Chris Beauchamp, Chief Market Analyst at IG.

"This will mean that further gains in bank stocks based off hopes of rising yields will be cancelled out for the time being, resulting in banks joining in the list of stocks that have struggled to find a catalyst to keep rising," he added.

The STOXX 600 hit a record high on Tuesday, after rising almost 12% this year, helped by strong earnings and optimism over re-opening of economies as COVID-19 vaccinations pick up.

"We've been very risk on for the start of 2021, and we've taken quite a bit of cyclicality off our asset allocation simply because we're missing the next big catalyst on the macro side," said Max Kettner, multi-asset strategist at HSBC Global Research.

European stocks are set to hold around or inch just above current record levels, with a Reuters poll of strategists predicting the STOXX 600 would reach 451 points by year end, just 1.3% above Monday's close.

British retailer Marks & Spencer MKS.L jumped 8.5% to a one-year high after it said it had traded well in the early weeks of the 2021-22 and that earnings would recover after an 88% slump in full-year profit.

French food firm Danone DANO.PA slipped 1.8% after Berenberg downgraded the stock to "sell", citing the hard-to-fix low-growth nature of most of its businesses.

Spire Healthcare SPI.L jumped 26.9% after Australia's Ramsay Health Care RHC.AX said it would buy the British hospital operator for 1 billion pounds ($1.42 billion).
Reporting by Sruthi Shankar and Shreyashi Sanyal in Bengaluru; Editing by Arun Koyyur and Alexander Smith

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