Gloomy earnings prospects hit European stock markets

* FTSEurofirst 300 falls 0.4 pct, Euro STOXX 50 down 0.6 pct

* Traders cite concerns over weak company results, euro zone

* Rise in Italy 1-year borrowing costs also hits sentiment

* Bang & Olufsen falls 4 percent after posting losses

By Sudip Kar-Gupta

LONDON, Oct 10 (Reuters) - European shares fell for thethird day running on Wednesday, pegged back by expectations ofweak corporate results that may weigh on equity markets intonext month.

Italy's one-year borrowing costs also edged up at an auctionof short-term debt, and traders pointed to that as a sign thatinvestors had turned firmly negative on the prospect of the eurozone's debt crisis easing swiftly.

The FTSEurofirst 300 index fell 0.4 percent to1,091.77 points, while the euro zone Euro STOXX 50 index

fell 0.6 percent to 2,458.22 points.

Equity markets have rallied since July, when world monetaryauthorities including the European Central Bank pledged strongnew action to improve the economic situation.

However, injections of cash into the financial system bycentral banks have failed to prevent a weakening in globalgrowth and that will likely undermine company results.

"I don't see much positive news coming from the Europeanearnings season," said JN Financial investment manager EdwardSmyth.

Danish luxury stereo and television maker Bang & Olufsen

fell 4.4 percent on Wednesday after reporting a wideningin pre-tax losses.

French bank Exane BNP Paribas also warned that thethird-quarter at French advertising group Publicismight not be as strong as expected, leading to Publicis falling2.7 percent and making it one of the worst performers on theFTSEurofirst 300.^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^Euro zone debt crisis in graphics^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ EURO THREAT

According to Thomson Reuters Starmine forecast data, theearnings growth of companies in the pan-European STOXX 600 index

will contract by 2.9 percent each year, on average,over the next five years.

The weak economic outlook was highlighted by theInternational Monetary Fund (IMF), which reported that the eurozone's debt crisis had contributed to "very fragile" confidencein the global financial system.

Greece is struggling with the terms of its bailout deal,while uncertainty remains over the timing of any eventualSpanish request for a broader sovereign rescue package on top ofalready agreed aid for its banks.

The rise in Italy's one-year borrowing costs also hurtsentiment.

"Yields went up at the Italian auction, and everyone hastheir eyes on these. It's an indication that risk aversion is onthe rise again in Europe," said David Thebault, head ofquantitative sales trading, at Global Equities.

The Euro STOXX 50 index has fallen around 3 percent so farthis week.

Adrian Slack, head of equities at Bastion Capital, said hewould look take up a "short" position - which bets on futurefalls - on the Euro STOXX 50 after it fell below the 2,473 pointlevel.

JN Financial's Smyth said he would look to take a 'long'position - which bets on a future rise in an asset - on the EuroSTOXX 50 if it fell to around the 2,450 point level.

(additional reporting by Blaise Robinson)

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