European stocks knocked by Chinese growth fears

                                
 * FTSEurofirst 300 down 1.5 percent, down 7.3 pct in 8 days
                                
 * Spanish stocks hit after Moody's, ahead of bond auction
                                
 * Euro STOXX 50 breaks key retracement level
                                
 * For up-to-the-minute market news, click on [STXNEWS/EU]
                                
 
                                
 By Blaise Robinson
                                
 PARIS, July 1 (Reuters) - European shares tumbled early on
Thursday, falling below a key support level and retreating for
the seventh time in eight sessions, after tepid Chinese economic
data fuelled concerns about the global recovery.
                                
 Spanish stocks were particularly under pressure, with the
IBEX <.IBEX> down 2.1 percent ahead of a five-year government
bond auction and after ratings agency Moody's placed the
country's Aaa rating on review for downgrade. [ID:nLDE6600CW]
                                
 Five-year credit default swaps (CDS) on Spanish government
debt rose 10 basis points to 270 bps, according to Markit.
                                
 In the first session of the month following a dismal quarter
for equities, the FTSEurofirst 300 <.FTEU3> index of top
European shares was down 1.5 percent at 978.09 points at 0806
GMT, after hitting a three-week low earlier.
                                
 The Euro STOXX 50 <.STOXX50E>, the euro zone's blue-chip
index, fell 1.7 percent to 2,530.27 points to move below a 38.2
percent retracement of its rally to a January peak from an
historic low in March 2009, signalling more losses. Next key
support level is the 2010 low at 2,448.10, hit in late May.
                                
 On Wednesday, the S&P 500 <.SPX> fell below the 1,040 level
it had held since February, breaking out to the downside from
what chartists call a very bearish 'head and shoulders' trend
reversal pattern, pointing to a major retreat in coming months.
                                
 Data showed the pace of Chinese manufacturing growth slowed
in June as government acted to cool the property market and curb
bank lending.
                                
 "Asian growth has been the engine of the world economy so it
does not bode well if China is losing steam. The market had
doubts about the global economy and these numbers are confirming
the doubts," said Jacques Henry, analyst at Louis Capital
Markets.
                                
 "With the poor data we just got from the United States,
people are increasingly nervous about the risk of a new
recession."
                                
 China's official Purchasing Managers' Index fell to 52.1 in
June from 53.9 in May, the weakest reading since February, and
falling short of the median forecast of 53.1 in a Reuters poll.
A separate survey compiled for HSBC fell more steeply to a
14-month low of 50.4 from 52.7 in May. [ID:nLDE660018]
                                
 Mining shares, among the most sensitive to Chinese data,
fell along with metal prices, with Xstrata <XTA.L> down 1.4
percent, BHP Billiton <BLT.L> down 0.9 percent, and Rio Tinto
<RIO.L> down 1 percent.
                                
 
                                
 WEAK FRENCH MANUFACTURING DATA
                                
 Shares in banks, which face repaying the European Central
Bank close to half a trillion euros in emergency loans on
Thursday, were also among the biggest losers, with Credit
Agricole <CAGR.PA> down 3.9 percent, BBVA <BBVA.MC> down 3.7
percent and Banco Popolare <BAPO.MI> down 2.9 percent.
                                
 Barclays <BARC.L> dropped 3.1 percent. Thursday, analysts
cut earnings estimates for the British lender after it said
investment banking conditions weakened in the past two months.
                                
 Adding to negative sentiment, a purchasing manager's survey
showed France's manufacturing recovery eased for a second
straight month in June and firms stepped up job cuts, fuelling
jitters on future demand in the euro zone's second-largest
 economy. [ID:nSLAUHE67U]
                                
 But investors got a glimpse of hope from Germany, with a
survey showing the manufacturing sector expanded for a ninth
month running in June, growing at the same pace as in May
despite signs austerity measures abroad may be slowing demand.
[ID:nSLAUHE67M]
                                
 Investors also awaited U.S. weekly jobless claims, due at
1230 GMT, U.S. pending home sales for May, due at 1400 GMT, as
well as the Institute for Supply Management's June manufacturing
index, due at 1400 GMT. Economists in a Reuters survey expected
a reading of 59.0 versus 59.7 in May.
                                
 Around Europe, Britain's FTSE 100 index <.FTSE> was down 1.5
percent, Germany's DAX index <.GDAXI> down 1.3 percent, and
France's CAC 40 <.FCHI> down 2 percent.
                                
 The FTSEurofirst 300 <.FTEU3> index of top European shares
has lost 6.4 percent so far this year, while the FTSE 100 is
down 10.4 percent, the DAX is down 1.1 percent and the CAC is
down 14.2 percent.
 (Editing by Dan Lalor)