European shares started on a tepid note on Thursday as caution dominated the mood ahead of a monetary policy decision by the European Central Bank and remarks by president Christine Lagarde on the outlook for interest rate cuts.

The pan-European STOXX 600 was flat, as of 0720 GMT, with a 1.3% drop in the telecommunications sector.

All eyes will be on ECB's decision due at 1215 GMT, where the central bank is likely to stand pat on interest rates, but focus will be on any hints that a rate cut could be delivered in June, given easing price pressures and economic weakness.

Rate-sensitive sectors such as real estate inched 0.2% higher, while financials dipped 0.1%.

Among top movers, shares of Societe Generale rose 3.4% after the French lender said it has agreed to sell a professional equipment financing business to rival BPCE for 1.1 billion euros ($1.18 billion), as part of a wider divestment strategy.

(Reporting by Johann M Cherian and Ozan Ergenay; Editing by Sherry Jacob-Phillips)