European shares hit by weak Asian growth outlook

* FTSEurofirst 300 closes down 1 pct, Euro STOXX 50 down 1.4pct

* World Bank downgrade to Asia forecasts hits stock markets * Several traders favour buying on dip vs selling on rally * Investors brace for weak Q3 European earnings season By Sudip Kar-Gupta

LONDON, Oct 8 (Reuters) - European shares fell on Mondayafter a downbeat report on the outlook for Asian growth cappedinvestor sentiment around corporate earnings, and kept marketsfirmly within their recent tight trading range.

Economic concerns mounted after the World Bank cut forecastsfor the East Asia and Pacific region, saying the slowdown inChina - the world's largest consumer of raw materials - couldworsen and last longer than expected.

The FTSEurofirst 300 index closed down around 1percent at 1,101.02 points, erasing much of a 1 percent rise onFriday after better-than-expected U.S. employment data. Theindex has traded in a tight 25 point range since Sept. 26.

The euro zone Euro STOXX 50 index fell 1.4percent to 2,496.09 points.

The World Bank's warning about the weakening Chinese economycaused a 1 percent fall in the STOXX basic resources index, whose constituents often rely heavily on demand fromAsian economies, such as mining and steel companies.

The STOXX European bank index also fell 1.7 percent,as persistent worries over the euro zone debt crisis hitfinancial stocks.

Belgian bank KBC , which disappointed traders due toa lack of development on how it will repay state aid, was theworst performer on the FTSEurofirst 300, falling 5.2 percent.

"We have been taking profits on European equities fromSeptember onwards. Most of the 'good news' has already beenpriced in and the euro zone situation is still full ofuncertainty," said Francois Savary, chief investment officer atSwiss bank Reyl.^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^Euro zone debt crisis in graphics^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ INVESTORS BRACE FOR WEAK Q3 EARNINGS

Equity markets have rallied since late July, when theEuropean Central Bank and other major central banks pledged newmeasures to fight off the effects of the economic slowdown andeuro zone debt crisis.

The FTSEurofirst 300 has risen around 8 percent since lateJuly.

But it has slipped some 2 percent from mid-September, whenit hit a 14-month high, as investors have come to realise thatalthough the ECB has prevented a major implosion in the eurozone, it has not yet fully resolved the region's problems.

The ECB cannot activate a government bond-buying programmeuntil Spain requests a sovereign aid package, but euro zoneministers said on Monday that Spain does not need a bailout fornow.

Italian carmaker Fiat fell 4.2 percent as it denieda media report of a probe into its liquidity position, pushingthe STOXX European automobile sector down 2.5 percent.

Traders said stock markets were historically vulnerable topull-backs in the final few months of the year, and companies inthe pan-European STOXX 600 index were expected toreport a 0.7 percent decline in earnings, according to ThomsonReuters Starmine data.

"We're coming into quarterly earnings season. We're cominginto what is typically the most vulnerable point for equitiesmarkets," said Tavira Securities trading head TobyCampbell-Gray.

However Campbell-Gray said he would rather use equity marketdeclines to buy stocks on the cheap than sell on the back of arecent rally.

Reyl chief investment officer Savary said he would considerbuying equities if the Euro STOXX 50 fell to 2,400 points.

Berkeley Futures' head of trading Charles de Roeper felt anypull-back on European stock markets would be limited, withequities still offering better returns than benchmark governmentbonds via their dividend yields.

"We'll continue to be range-bound, but I don't really seemuch downside on this market, and we would be buyers on thedip," said de Roeper.

(Editing by Catherine Evans)

((sudip.kargupta@thomsonreuters.com)(+44 207 542 9795)(ReutersMessaging: sudip.kargupta.thomsonreuters.com@reuters.net))