European stocks fall sharply, led by Vodafone

LONDON, July 22 (Reuters) - European shares fell 1 percent early on Tuesday, led by Vodafone (VOD.L), which sank after issuing a weak outlook, while banks were weighed down by disappointing earnings from American Express (AXP.N) overnight.

By 0717 GMT, the FTSEurofirst 300 index .FTEU3 of top European shares lost 1.2 percent to 1,156.02 points.

Vodafone shed 12 percent after the world's largest mobile phone company by sales released in-line revenues for the first-quarter but spooked investors by saying it expected full-year revenue to be around the bottom of its previously stated range due to economic weakness.

Among sectors, banks were the biggest drag on the index.

The DJ Stoxx European banks .SX7P fell 1.9 percent with Deutsche Bank (DBKGn.DE), Credit Suisse (CSGN.VX) and HBOS HBOS.L all down between 1.6-2.5 percent.

"The after-hours indication from the U.S. was negative and in particular American Express is weighing on the banks," said Christian Falkner, asset manager at Alpha Trading in Frankfurt.

"We have claimed back quite some ground from our lows during recent sessions. The earnings season....is entering a more decisive phase here so I think the focus will be on individual stocks," he added.

U.S. credit card issuer American Express overnight released a steeper-than-expected 38 percent drop in quarterly profit as it set aside more money to cover credit losses.

(Reporting by Patrizia Kokot)