* FTSEurofirst 300 down 0.8 pct, Euro STOXX 50 down 1.3 pct
* DAX underperforms again on worries over Ukraine
* Deutsche Bank hurt by report of capital hike (Updates closing prices with no other changes to text)
LONDON/PARIS, April 25 German stocks led European shares lower on Friday as new signs of violence in Ukraine hit sentiment, although equities remained underpinned by corporate takeover activity.
Ukrainian forces killed up to five pro-Moscow rebels on Thursday, prompting Russia to launch army drills near the border. In response, the United States said on Friday it will press European allies to impose more sanctions if Russia steps up action in Ukraine.
Ukrainian Prime Minister Arseny Yatseniuk accused Russia of wanting to start World War Three by occupying Ukraine "militarily and politically", in some of the strongest language he has used.
"At the moment this is mainly noise, but there is a risk that the Ukrainian situation could deteriorate. We've seen how vulnerable the DAX has been to tough rhetoric, for example," said Mike Harris, a partner at stockbroker TJM Partners.
Germany's DAX index, seen as the European market most exposed to the crisis in Ukraine, closed down 1.5 percent, at 9,401.55 points.
The DAX, which has outperformed other European stock indexes for years, is down 1.6 percent so far in 2014, trailing France's CAC 40, up 3.4 percent in 2014, Milan's FTSE MIB, up 13 percent and Madrid's IBEX, up 3.9 percent.
"I'm a seller here. The DAX has got the legs to come off down to 9,250 points," said Darren Courtney-Cook, head of trading at Central Markets Investment Management.
Deutsche Bank was among the biggest blue-chip losers, down 2 percent on a report that it may raise as much as 5 billion euros ($6.91 billion) in capital this year to cope with European stress tests and new capital rules.
The pan-European FTSEurofirst 300 index, which hit a near six-year high earlier this month, was down 0.8 percent at 1,332.83 points at the close.
The euro zone's blue-chip Euro STOXX 50 index shed 1.3 percent, to 3,147.40 points.
Bucking the trend, Bouygues was the top FTSEurofirst 300 riser, up 4.2 percent after Reuters reported that U.S. industrial products giant General Electric is in talks to buy the global power turbines division of struggling French engineering group Alstom.
Bouygues has a 29 percent share in Alstom, and said it was backing the deal. Shares in Alstom were suspended from trading by a regulator, pending a statement by the company.
Europe bourses in 2014: link.reuters.com/pap87v
Asset performance in 2014: link.reuters.com/gap87v
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