European shares slip but set for weekly gains; Mercedes drops
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Mercedes drops after it cuts outlook, flags China weakness
UK's Burberry slips after Jefferies downgrade
Luxury goods sector drops over 2%
STOXX 600 down 0.4%
Updated at 0805 GMT
By Shubham Batra
Sept 20 (Reuters) -European shares slipped on Friday after a rally in the previous session spurred by the U.S. Federal Reserve's outsized interest rate cut, while shares of Mercedes were set for their worst day in 15 months after the automaker cut its core profit outlook.
The pan-European STOXX 600 index .STOXX fell 0.4% to 519.76 points as of 0805 GMT but was on track for a second straight week of gains.
All major European markets were trading lower, except Spain's .IBEX that edged up 0.1%.
Automobile shares .SX8P led sectoral losses with a 2.9% fall, hurt by a 7.6% drop in Mercedes-Benz MBGn.DE after the carmaker cut its full-year profit margin for the second time in less than two months, as overall sales volume fell in China.
Mercedes also dragged the German benchmark index .GDAXI, which declined 0.8%. German producer prices fell less than expected in August, decreasing by 0.8% on the year versus expectations of a 1% decline.
Europe's luxury goods sector .STXLUXP slid more than 2% after Jefferies said it does not see appreciable improvement for the luxury market in the second half of the year.
Technology shares .SX8P were down 1.1%, while personal goods shares .SXQP dropped 1.5%.
Britain's FTSE 100 .FTSE declined 0.5%, after a survey showed consumer confidence dropped sharply to a six-month low.
"Consumers were less confident about their own personal financial position in September compared to August, and they reported that they are less likely to make a large purchase, compared to the previous month," said Kathleen Brooks, research director for XTB.
"Worryingly for the government, consumers' view of the economic outlook also deteriorated sharply in September."
British retail sales rose by a stronger-than-expected 1% in August, compared with forecast of a 0.4% monthly rise in sales volumes from July, boosting the pound.
Investors now shift focus to euro zone's consumer confidence data for September, due at 1400 GMT, for more clues on the health of the region's economy.
Among other movers, Novo Nordisk NOVOb.CO advanced 0.5% after the European Medicines Agency backed the use of the Danish drugmaker's popular drug Wegovy to help ease heart failure in people with obesity.
UK's Burberry BRBY.L was down 4.6% as Jefferies cut rating on the stock to "underperform" from "hold" and lowered the target price to 490p from 800p.
Reporting by Shubham Batra in Bengaluru; Editing by Varun H K and Mrigank Dhaniwala
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