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UPDATE 1-Ukraine tensions and China weakness hit European shares

* FTSEurofirst 300 down 0.4, Germany's DAX down 0.9 pct

Report of Russian shots in Ukraine reignites sell-off

* Mining shares hurt again by soft Chinese data

* Bouygues-Iliad deal sparks rally in French telcos

* Periphery outperforms as investors bet on local recovery

By Francesco Canepa

LONDON, March 10 (Reuters) - European shares fell for the second straight session on Monday, hit by tensions between Russia and Ukraine and weak economic data from the world's second-largest economy, China.

Most European indexes swung lower in the afternoon after the Interfax news agency reported Russian troops had opened fire with automatic rifles during a takeover of a Ukrainian naval post in Crimea.

The pan-European FTSEurofirst 300 index closed 0.4 percent lower at 1,320.98 points after re-testing a low set last week earlier in the session, in a broad sell-off involving most sectors.

German steel maker ThyssenKrupp, down 3 percent, was among the top fallers in Europe as Chinese steel and iron ore futures slumped to their lowest levels ever on concerns about a slowdown in the world's top commodity buyer.

Trade data showed China's exports in February tumbled 18.1 percent from a year earlier, raising questions about the health of the country's economy.

"The Ukrainian crisis worries me more than the slowdown in China because of its proximity to Europe," said Claudia Panseri, global equity strategist at Societe Generale Private Banking.

"It could also have a negative impact in terms of contagion effect and capital outflows from other emerging markets at a time when global economic growth is still fragile."

Panseri preferred shares exposed to a recovery in Europe's own economy, such as banks or German and British mid and small-cap stocks, to companies with an emerging market presence.

Shares with the largest exposure to Russia fell sharply, such as Austrian bank Raiffeisen Bank International and Finnish tyre maker Nokian Renkaat, which dropped 2.7 percent and 2 percent respectively.

GERMANY HIT, PERIPHERY OUTPERFORMS

Germany's Dax blue-chip index, seen as a play on the global economy through exporters such as car maker VW , shed 0.9 percent.

"Germany is hurt a bit more than the others as it is an exporter nation with vast interests in both Central Europe and China," said Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets.

"However, in the larger scheme of things this is probably a healthy correction. We see this as a little pause and not the end of the bull market, and remain buyers of the dip."

By contrast, indexes with a relatively high weighting in banking shares and a strong domestic focus, such as Italy's FTSE MIB and Spain's Ibex rose, by 0.6 percent and 0.3 percent, respectively.

The former was also helped by data showing Italian industrial production rebounded more than expected to post its strongest increase for more than two years.

French telecom shares also rose following a deal between Bouygues and Iliad, which rallied 8.7 percent and 11.1 percent respectively.

Bouygues' telecom unit agreed to sell its mobile network and much of its spectrum to Iliad as a way to head off competition regulators' concerns about its pending bid for Vivendi's SFR unit.

Robin Bienenstock, analyst at Bernstein Research, said that a combination of SFR and Bouygues would lift the entire sector, leaving out only cable operator Numericable, which had also bid for SFR and whose shares fell 12.4 percent on Monday.

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