Europe stocks close lower; banks retreat, Bayer falls

* FTSEurofirst 300 index closes down 0.5 pct

* Banks retreat, Bayer down

* U.S. GDP unchanged, jobless claims fall

By Joanne Frearson

LONDON, Aug 27 (Reuters) - European shares closed lower for the second consecutive day on Thursday, after a choppy session in which banking stocks retreated from earlier gains and chemical makers slipped.

The pan-European FTSEurofirst 300 .FTEU3 index of top shares closed down 0.5 percent at 968.67 points after being up as much as 976.79 points earlier in a session that saw the index jump around after U.S. gross domestic product (GDP) and jobless claims data were released.

The U.S. GDP figures were not as bad as expected," said Peter Dixon, an economist at Commerzbank. "Markets have demonstrated a lot of volatility in recent days and I think markets will see-saw on the back of good and bad news."

"U.S. jobless figures were a little bit worse than expected, but still were an improvement on the previous week. These numbers are volatile and I would not want to base any kind of assessment on these numbers," Dixon said.

U.S. jobless claims fell last week to 570,000, slightly above the 565,000 predicted by analysts. [ID:nN27309693]

Data also showed that the U.S. economy contracted at an annualised rate of 1.0 percent in the second quarter, the same as its initial reading. Analysts had predicted a downwardly revised reading of -1.5 percent. [ID:nN27303385]

Banks reversed from earlier gains to feature among the worst performers. HSBC (HSBA.L), Deutsche Bank (DBKGn.DE), Dexia (DEXI.BR), Lloyds Banking Group (LLOY.L) and Royal Bank of Scotland (RBS.L) were down 0.8 to 7.8 percent.

However, Credit Agricole (CAGR.PA) gained 3.7 percent after it posted better-than-expected, second-quarter profit and said its businesses were well placed despite the tough economic environment. [ID:nLQ397152]

BAYER FALLS

Chemical stocks were lower. German drugmaker Bayer BAYG.DE fell 4.1 percent after traders pointed to concerns that peer Boehringer Ingelheim may report strong data about its rival drug to Bayer's anti-blood-clotting pill Xarelto.

"Some people are getting worried (that Boehringer Ingelheim) will report data on a drug that is the most serious competitor to Xarelto," a local Frankfurt-based trader said.

Mining stocks slipped as copper MCU3=LX lost 0.1 percent. Antofagasta (ANTO.L), Eurasian Natural Resources Corporation (ENRC.L), Rio Tinto (RIO.L) and Xstrata (XTA.L) were 0.4 to 4.1 lower.

Beverages were among the big losers on the index. Diageo (DGE.L) was down 4.1 percent after it warned recovery would come in 2010 at the earliest, prompting it to cut its growth target after it met forecasts with a 10 percent rise in annual earnings. [ID:nLQ209171]

On the upside, utilities were the top performers. French power and gas group GDF Suez (GSZ.PA) gained 2 percent after it said it was confident it would meet its earnings targets despite the weaker economy that has reduced demand for energy as it predicted better trading by year-end. [ID:nLR718267]

A Reuters poll has shown leading investors have kept their portfolios steady in August, as the northern summer doldrums and caution about how far the global equity market rally can go led many to sit back and wait. [ID:nLAG003688]

Across Europe, the FTSE 100 .FTSE index was down 0.4 percent, Germany's DAX .GDAXI was down 0.9 percent and France's CAC 40 .FCHI was 0.5 percent lower. (Editing by Karen Foster)