By Blaise Robinson

PARIS (Reuters) - European stocks slipped in early trade on Wednesday, giving up some of the previous session's sharp gains, as miner Xstrata (XTA.L: Quote, Profile, Research) sank 8 percent after bid talks with Brazil's Vale (VALE5.SA: Quote, Profile, Research) RIO.N broke down.

But the fall was cushioned by gains in the telecoms sector, with Vodafone (VOD.L: Quote, Profile, Research) up 2.4 percent. The world's largest mobile phone company by revenue said it expects to start receiving dividends from its U.S. joint venture Verizon Wireless next year.

At 9:50 a.m. (British time), the FTSEurofirst 300 index of top European shares was down 0.36 percent at 1,261.50 points. The index surged 3.2 percent on Tuesday, lifted by a rally in banks, Wednesday's biggest sectoral loser.

"I think that we are reaching a floor, at least for now. Historically, when the market starts pricing in a recession, there is a 20 percent drop in stocks. And this time, equities were not overpriced when the downturn started," said Jean-Luc Buchalet, CEO of Pythagore Investissement, in Paris.

"There is usually a low point after six months, so this will probably be sort of a short-term rally as a lot of bad news has been digested. But we can expect to fall to a new low sometimes around June."

The FTSEurofirst 300 has lost 16 percent since the start of the year and is down 23 percent since reaching a multi-year high last summer, as fears of a U.S. recession and worries over the impact of a global credit crisis hit stock markets worldwide.

Xstrata was Europe's biggest laggard on Wednesday after Vale, the world's largest iron ore miner, said talks to buy Swiss rival Xstrata had failed and that Vale would look at other potential takeover targets.

In the banking sector, Deutsche Bank (DBKGn.DE: Quote, Profile, Research) fell 1.9 percent after the German lender said the disruption to revenues and writedowns on assets stemming from the global credit crisis could put its profit goal for this year at risk.