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Commodity stocks pull European shares cautiously lower

* FTSEurofirst 300 down 0.5 percent

* Growth worries hamper oils and miners

* Engineers hit by profit warning

* STMicroelectronics rallies on break-up talk

By David Brett

LONDON, Oct 12 (Reuters) - European blue chip shares ended the week in negative territory with weakness in commodity stocks outpacing gains in healthcare and consumer staples.

The FTSEurofirst

fell 5.47 points, or 0.5 percent to 1,093.33, paring the previous session's gains but staying within the tight 20-point range in place since Sept. 26.

The uptrend in the index that began in June fuelled by central bank stimulus and relatively cheap valuations has just about remained in tact, but global growth concerns are now capping gains.

The FTSEurofirst 300 has hovered in a band of about 50 points since early August after the European central Bank announced it would do what it takes to save the Euro and an even tighter range since the U.S. Federal Reserve unveiled QE3 in mid-September.

"There are still some very large problems out there and although the recent central bank actions will support prices it does not really solve the underlying problems, and the debt and lack of growth will be with us for a really long time," Peter Clark, chief strategist at Ingenious Asset Management, said.

Equities have suffered from the law of diminishing returns from stimulus measures. Having risen 80 percent after QE1, equities returned 29 percent post QE2 and just 17 percent following QE3, according to data from FTSE.

Clarke is cautious on cyclical stocks such as miners and banks, but is gradually increasing exposure to top quality equities that are managing to inch profits and dividends higher.

"We are hunting with a rifle rather than a shotgun," he said.

The FTSEurofirst's least-favoured sectors remain those where investors are struggling to get a grasp on their earnings outlook.

Major oil companies continue to lag, while basic resource stocks are down 1.6 percent in 2012.

Credit Suisse lowered its earnings per share estimates for the major mining companies by 15-40 percent on Friday although it is cyclically positive on the sector, seeing growth momentum improving over the next six months.

Kazakhmys and Anglo American

, two of Credit Suisse's least-preferred stocks in the sector, fell 4.1 percent and 1.7 percent respectively on Friday.

Antofagasta

shed 3.6 percent after HSBC downgraded the miner to "underweight" from "neutral". PROFIT WARNING

Commodity stocks were not the only sectors suffering from outlook worries.

A profit warning from UK-listed advanced materials group Morgan Crucible

, echoing Cookson's

recent

warning, weighed on engineering shares.

UK blue chip engineers GKN and IMI dropped

3.3 percent and 2.3 percent respectively.

AkzoNobel

tumbled 6.1 percent with the Dutch paints maker's Chief Executive Ton Buechner still on medical leave, dashing analysts' hopes for a quick turnaround at the company.

Saipem

shed 5.6 percent after Nomura cut its rating on the Italian oil services company to "neutral" from "buy" on a reduced earnings per share outlook.

And concerns over future earnings saw German chemicals firm Lanxess

drop 4.4 percent, as Barclays and Credit Suisse cut their respective recommendations on the company.

Elsewhere, M&A talk fueled interest in PSA Peugeot Citroen

, which rose 2.3 percent after a report in La Tribune said the French carmaker is working on plans with General Motors

for a European joint venture. STMicroelectronics

rallied more than 17 percent at one stage on a report that Europe's top semiconductor maker was considering a breakup. It pared gains towards the close to finish 6.4 percent higher after the report was quickly denied by the firm.

(Editing by Susan Fenton)

((david.brett@thomsonreuters.com)(020 7542 8099)(Reuters Messaging: Reuters Messaging: david.brett.thomsonreuters.com@reuters.net))

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