European stocks dipped on Thursday, as investors braced for a rate cut from the European Central Bank and awaited hints on policy moves next year as the euro zone economy struggles with slowing growth and heightened political risks.

After a positive open, the pan-European STOXX 600 index slipped 0.1%. Retail stocks lagged, while automakers led gains.

Rate-sensitive euro zone bank shares rose 0.4%.

The ECB is expected to cut interest rates again, with traders pricing in an 81% chance of a 25 bps reduction and a 19% chance of a 50 bps cut, as euro zone inflation nears target and the economy falters. The ECB's rate decision is due at 1315 GMT.

Meanwhile, Swiss stocks got a lift after the Swiss National Bank cut its interest rate by 50 basis points, the biggest reduction in almost 10 years, as it sought to stay ahead of expected cuts by other central banks and cap the rise of the Swiss franc.

"In Europe, they're probably cutting rates too slowly. The economies are slowing and the central banks are really trying to catch up while in the U.S., we see more pre-emptive policy cuts."

"That's what we see in financial markets as well, U.S. stocks are outperforming European, the dollar is rallying."

While the STOXX 600 is trading below all-time highs, it is up just 8.5% on a year-to-date basis, compared with a 27.6% gain for the S&P 500.

Among stocks, SThree Plc tumbled 26% after the British recruiter warned on the current financial year profit, citing tough hiring market conditions amid increased political and macro-economic uncertainty, particularly in Europe.

Diageo Plc rose 3.8% after UBS upgraded the stock to "buy" from "sell", saying its analysis showed positive signs for the spirit maker's U.S. business.

Swiss contract drugmaker Lonza rose 6.1% following plans to exit its capsules and health ingredients business.

(Reporting by Sruthi Shankar in Bengaluru; Editing by Janane Venkatraman and Vijay Kishore)