* FTSEurofirst 300 down 0.3 percent
* Trade volatile as futures and options expire
* Investors await US manufacturing, sentiment data
* Royal Dutch Shell falls after JP Morgan downgrade
* France's Bouygues Telecom rallies on 4G switch
By David Brett
LONDON, March 15 (Reuters) - European shares edged lower on Friday in volatile trade as quarterly options expired, with investors awaiting more U.S. data, which has been the compass for markets in recent sessions.
By 1122 GMT, the FTSEurofirst 300 was down 4.13 points, or 0.3 percent at 1,203.70, but the index was set to post a fifth consecutive weekly gain.
"Equities have been offered lower after another strong weekly performance as the options expiry gives way to some intraday volatility," Matt Basi, sales trader at CMC Markets, said.
Share prices were choppy as quarterly and monthly futures and options expire, which means some investors will rebalance their portfolios.
Investors also braced for potentially more volatility as Italy's parliament reconvened almost three weeks after an inconclusive election, with parties still deadlocked over how to form a government in the euro zone's third-largest economy.
A recent string of strong U.S. economic data, however, including a forecast-beating payrolls report last week, has pushed European share markets to new multi-year highs this week.
"Traders will be focusing on data due from the States this afternoon before deciding whether to claim back the early losses and push on again into the close," Basi said.
Recent data has raised expectations that a U.S. manufacturing report on Friday will also come in north of economists' estimates, helping sustain the share rally.
"U.S. data will continue to reveal improvement, leaving the positive tone to markets underpinned," Credit Agricole said in a note.
It expected March's Empire manufacturing survey and University of Michigan confidence index, due out at 1230 GMT and 1355 GMT respectively, to beat consensus expectations by 1 point and 0.5 point, respectively, coming in at 11 and 78.5, from previous readings of 10.04 and 77.6.
ROYAL DUTCH SLIDES
Oil heavyweight Royal Dutch Shell was one of the biggest drags on the market, falling 1.7 percent after JP Morgan cuts its recommendation on the stock to "underweight", questioning the company's growth, potential capital requirements and implications for near-term cash returns.
French entertainment-to-telecoms conglomerate Vivendi dropped 3.7 percent after DirecTV, the largest U.S. satellite television provider, ended its pursuit of Vivendi's GVT.
Swiss luxury chocolate maker Lindt & Spruengli and budget fashion retailer Hennes & Mauritz shed 2.1 percent and 0.2 percent, respectively, after results.
German carmaker Volkswagen slipped 2.5 percent to 152.00 euros on talk Deutsche Bank was placing VW preference shares in a price range of 156.25-160.25 euros, two traders told Reuters on Friday.
Among top gainers, France's Bouygues Telecom rose 4.4 percent after wining permission to re-use mobile spectrum deployed for voice calls for fourth-generation mobile data services as of Oct. 1, raising pressure on its competitors.
Broker upgrades pushed British Airways owner International Airlines and temporary power provider Aggreko 3.2 percent and 1.3 percent higher respectively, while chip designer ARM Holdings climbed 2.7 percent after broker Jefferies upgraded the company to "buy" from "hold".