European shares fall on doubts over Spain bailout

PARIS, Oct 2 (Reuters) - European shares fell early on Tuesday, surrendering a portion of the previous day's rally as doubts over whether or not debt-stricken Spain will request a bailout kept investors on edge.

At 0704 GMT, the FTSEurofirst 300 index of top European shares was down 0.6 percent at 1,098.14 points after surging 1.4 percent on Monday.

According to senior euro zone sources, Spain is ready to request a bailout as early as next weekend but German officials said Madrid should hold off, creating confusion among investors.

"There are worries over whether or not it will be a bailout and whether such a bailout would trigger credit downgrades," said David Thebault, head of quantitative sales trading, at Global Equities.

"But beyond that, markets have not completely realised how powerful the new ECB policy is and how it will reshape things, so there's still upside."

Euro zone banks were among the top losers on Tuesday, with Credit Agricole down 2.6 percent and UniCredit

down 1.3 percent.

(Reporting by Blaise Robinson; editing by Simon Jessop)