Worries over earnings and Spain hit European shares

* FTSEurofirst 300 closes down 1.7 pct at 1,088.71 points

* Euro STOXX 50 falls 2.1 pct to 2,477.92 points

* Concerns over Spain and weak corporate results hit markets

* Some traders back going ``short'' on European equities

LONDON, Oct 23 (Reuters) - A top European share index slid to its lowest level in more than one-and-a-half months on Tuesday, hit by worries over company results and Spain's debt crisis, and some traders bet on European stocks falling further.

The FTSEurofirst 300 index ended down 1.7 percent at 1,088.71 points - its lowest closing level since ending at 1,079.24 points on Sept. 5.

The euro zone's blue-chip Euro STOXX 50 index also fell 2.1 percent to 2,477.92 points, while the Euro STOXX 50 implied volatility index rose 10 percent, highlighting investors' concerns over the market outlook.

This marked the worst day for euro zone stocks and the biggest rise for implied volatility since Sept. 26, when violent anti-austerity protests hit Spain and Greece.

The borrowing costs of Spain, which is under pressure to seek a sovereign bailout, rose on Tuesday after credit rating agency Moody's downgraded five Spanish regions.

Although European stock markets have rallied from July onwards, when world central banks unveiled new quantitative easing (QE) measures to fight off the economic slowdown, they have fallen back from peaks reached in mid-September.

``If the markets can fall even in the face of fresh QE, it does not bode well,'' said Richard Edwards, who runs trading and analytics firm HED Capital.

Edwards recommended investors bet on further falls on Spain's IBEX and Italy's FTSE MIB equity indexes by going ``short'' on both markets, and added Germany's DAX stock market could lose more ground.


The IBEX fell 1.6 percent, while Italy's FTSE MIB declined by 1.8 percent. The DAX retreated by 2.1 percent to 7,173.69 points, and fell below the 50-day simple moving average level, which some traders took as a sign it could fall further.

``European stock markets have been relatively muted in terms of their movement in recent weeks, but all the usual concerns over the peripheral countries could easily come back into focus at any time if there is another catalyst,'' said Dale Briscoe, head of investment advisory firm World Vision Strategies.

Along with persistent worries over the euro zone debt crisis, with Greece struggling to meet the terms of its bailout while Italy remains in the firing line along with Spain, weak company results have also hit equities.

Swedish engineer Alfa Laval was the worst-performing stock on the FTSEurofirst 300 index, declining by 5.7 percent after its orders fell more than expected during the third quarter.

Nick Xanders, head of European equity strategy at broker BTIG, said there was a risk of the Euro STOXX 50 index retracing back towards its late-August low of 2,400 points after failing to break out of the 2,400-2,600 range.

Adrian Slack, head of equities at Bastion Capital, also felt the DAX could fall to around 7,033 points and added that buying equities on a stock market dip was now getting riskier.

``I would sell into strength rather than buy on the dip,'' he said.