(Refiles with GLOBAL MARKETS tag)
* Stocks lower on reports of German bank fines
* ECB Lautenschlaeger says QE last resort
* UK output dips unexpectedly, sterling falls
* Market looks to Fed minutes, earnings season
By John Geddie
LONDON, July 8 (Reuters) - Europe's main stock indices and lower-rated government bonds slipped on Tuesday amid reports of new U.S. fines for banks and dimming prospects the European Central Bank will launch an asset purchase programme.
Bank shares weighed on European equity indexes which fell for a third consecutive day, as Germany's largest lenders were said to be negotiating a settlement with U.S. authorities over their dealings with countries blacklisted by Washington. The talks follow a huge fine for French lender BNP Paribas.
"These fines add to an existing uncertainty in the banking sector," said Berenberg's senior economist Christian Schulz, pointing out that the balance sheets of the region's banks are currently under review by the ECB.
At 0945 GMT, the pan-European FTSEurofirst 300 index .FTEU3 was down 0.5 percent at 1,380.33. Germany's Dax was down 0.6 percent and France's CAC down 0.4 percent. The UK's FTSE 100 also lost 0.5 percent, weighed down by weaker than expected UK factory output data.
Shares in German lender Commerzbank fell 3.5 percent as the New York Times reported it could pay at least $500 million in penalties. Its larger competitor Deutsche Bank saw its shares slip 0.5 percent.
The ECB has made unprecedented policy moves in recent months to stimulate bank lending and revive the euro zone economy.
But late on Monday ECB Executive Board member Sabine Lautenschlaeger showed the strength of opposition in some quarters to a programme of asset purchases, which she said should be a last resort.
Many economists say such a programme, known as quantitative easing, might not prove as effective as it has in the United States because Europe relies on traditional forms of bank lending more than capital markets. ECB chief Mario Draghi has also said that might be the case.
Berenberg's Schulz said he felt QE should only be used to fight a future sovereign debt crisis stemming from the bloc's fragile states. It was these lower-rated sovereign bonds that struggled on Tuesday, with traders citing Lautenschlaeger's speech.
Yields on 10-year Greek, Portuguese, Spanish, Italian and Irish bonds edged up between 1-4 basis points, although they remain near all-time lows.
In currency markets, the big mover was sterling which fell against the dollar after an unexpected dip in British factory and industrial output, although strategists said the data was unlikely to curb the pound's strength for long.
"Taken as a whole the UK data still points at quite a resilient, robust recovery," said Valentin Marinov, a currency strategist at Citigroup.
The euro was little changed against the U.S. dollar as markets waited for minutes on Wednesday of the Federal Reserve's last meeting which will be scoured for hints on when its policy committee might consider raising interest rates.
Asia was quiet overnight, with the region's stocks tracking sideways as the earnings season kicked off with disappointing guidance from regional tech heavyweight Samsung.
MSCI's broadest index of Asia-Pacific shares outside Japan was a fraction firmer, touching a three-year high of 502.27 during the session.
The U.S. earnings season starts with Alcoa later on Tuesday and dozens of major companies are scheduled to report next week, including numerous Dow components.
Profits are forecast to grow 6.2 percent for the quarter, according Reuters data, but investors see a chance of a return to double-digit growth for the first time in nearly three years.
In commodity markets, gold edged a fraction lower to $1,319.50 an ounce, having held to a relatively tight $1,305.90 to $1,332.10 range for the past two weeks.
Oil prices extended their recent decline as events in Iraq and Ukraine have so far not led to any serious disruption in flows. Brent LCOc1 dipped 57 cents to $109.61 a barrel and U.S. oil lost 20 cents to $103.32 a barrel. (Editing by Catherine Evans)