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UPDATE 2-European shares slip with U.S. inflation data in focus

* Sanofi slips on drug trial pause

* Tech stocks lead losses

* IWG plummets as analysts wary of recovery (Updates to close; adds details, comment)

By Shreyashi Sanyal and Anisha Sircar

Aug 9 (Reuters) - European shares dipped on Tuesday as investors cautiously waited for key U.S. inflation data later in the week for hints on the Federal Reserve's next move on interest rate increases.

The pan-European STOXX 600 index fell 0.6%, erasing nearly all of its gains from its best session in nearly two weeks seen on Monday.

Declines on Tuesday were led by rate-sensitive tech stocks amid an uptick in bond yields as traders raised bets on a half-point interest rate hike by the European Central Bank in September, also pricing a high chance of a 75 basis point move in the United States next month.


Banks were among the only outperformers, rising 0.1%.

Economically sensitive sectors such as miners and autos also fell after being among the top gainers in the previous session.

The STOXX 600 has floundered this month after climbing 7% in July on worries over dour economic data, rising geopolitical tensions and fears that higher interest rates could tip the economy into a recession.

"Uncertainty and volatility will remain high as slower growth, earnings downgrades, front-loading of interest rate hikes by major central banks and a likely intensified squeeze on Europe’s natural gas supplies over the winter months weigh on investor sentiment," said Nick Brooks, head of economic and investment research at ICG.

Focus is on a key inflation reading from the world's biggest economy on Wednesday after surprisingly strong employment data last week dented hopes that the U.S. Federal Reserve might go easy in its series of rate hikes aimed at tackling price pressures.

Among stocks, Swiss duty-free retailer Dufry rose 4.1% as it said it saw strong sales momentum continue in July despite the soaring inflation.

Germany's Continental said it expects a rise in auto production in the second half of the year as supply chains stabilise, but shares of the auto parts supplier slipped 6.5% on a heavy second-quarter loss.

Sanofi slipped 1.4% as the drugmaker paused its recruitment globally for late-stage studies of its multiple sclerosis drug.

Shares of IWG plunged 11.4% as the office rental group's first-half results failed to impress analysts who are expecting rising inflation and gloomy economic outlook to hamper its recovery.

Second-quarter earnings for companies that are part of the STOXX 600 are expected to rise 31.6% from a year earlier, according to Refinitiv, higher than estimates of 28.1% from last week. (Reporting by Shreyashi Sanyal and Anisha Sircar in Bengaluru; Editing by Sriraj Kalluvila and Lisa Shumaker)