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European shares fall as market braces for weak profits
* FTSEurofirst 300 down 0.9 pct, Euro STOXX 50 down 1.2 pct
* Investors brace for poor earnings season
* Metro, Michael Page fall after profit warnings
* Pick stock with high earnings quality - JPMorgan
By Francesco Canepa
LONDON, Oct 8 (Reuters) - European shares fell early on Monday as investors braced for a weak third-quarter earnings season and the prospect of a greater-than-expected economic slowdown in parts of Asia.
The world's fourth-largest retailer, Metro, was among top fallers after cutting its earnings outlook late on Friday, blaming rising unemployment in the euro zone and the sovereign debt crisis. Shares in the German group shed 3 percent, having traded nearly their full-day volume average by 1103 GMT.
Metro was joined by British recruiter Michael Page International, which said on Monday it expects its year profit to be below market expectations, sending the shares down 2.5 percent.
They were bad omens for the European third-quarter earning season, scheduled to start later this week, which was expected to see companies in the pan-European STOXX 600 index report a 0.7 percent decline in earnings, according to Thomson Reuters Starmine data.
"Companies that issued weak profit warnings or weak pre-reports have gone down quite a lot, which is telling you poor results are not priced in to some extent," Emmanuel Cau, a strategist with JPMorgan, said.
"We're still quite cautious about the market and we advise clients to be into quality stocks, which have given back some of their gains in the last few month and offer a good (buying) opportunity," he added, citing British American Tobacco and German business software maker SAP.
Cau warned that the summer rally equity rally, led by euro zone banks, came at a time of falling earnings estimates, which means European were now looking less attractive in the absence of a turnaround in earnings momentum.
An MSCI index of euro zone shares traded at 10.5 times its expected earnings for the next 12 months, a 20 percent discount to Wall Street's stocks, which have superior earnings prospects, broadly in line with the average discount since 2002 .
The broader, pan-European the FTSEurofirst 300 was down 0.9 percent at 1,102.01. The index rose 6.6 percent in the most recent quarter, lifted by expectations central banks would do more to shore up the global economy, but fell nearly 2 percent from mid-September, when it hit a 14-month high.
French luxury group PPR topped the index -- rising 2.5 percent in volume 117 percent its daily average -- after a source said the group would announce its plans for a possible stock market listing or spin-off of book and CD retailer Fnac on Tuesday.
Macroeconomic concerns mounted on Monday as the World Bank cut its economic forecasts for the East Asia and Pacific region, saying the slowdown in China - the world's largest consumer of raw materials - could get worse and last longer than expected.
Charts on the euro zone blue-chip Euro STOXX 50 index, down 1.2 percent at 2,501.60, and safe-haven German Bund futures, up 35 ticks, also suggested there were growing signs of bearishness among investors.
"Bund futures are successfully testing support before we see higher levels, which would suggest to me investors are risk averse and loosing for some safety," said Roelof-Jan Van den Akker, a senior technical analyst with ING in Amsterdam.
"To confirm this we still need (the Euro STOXX 50) to break support at (its most recent low of) 2,450."
He added that a close below 2,450 could open up a 150 point downside potential on the index, dragging it down to an underlying trendline stating from June lows.
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