* FTSEurofirst 300 down 0.5 pct, Euro STOXX 50 falls 0.8 pct
* Donetsk clashes peg risk-sensitive shares back
* Wall Street-led rally quickly fades
* Tesco boosted by CEO resignation
EDINBURGH, July 21 European stocks fell on Monday, hit by a drop in German stocks as sensitivity to tension in Ukraine mounted.
German blue chip stocks underperformed, with the DAX down 0.4 percent, as fighting erupted in the rebel-held city of Donetsk.
Risk-sensitive shares in the travel and leisure and autos and parts sectors, both down 1 percent, have been under pressure since Thursday, after the Malaysian passenger plane was shot down over Ukraine.
Some in the West are calling for a new series of sanctions against Russia, seeing the latter as ultimately complicit in the downing of the jet. Washnigton has been tougher than the European Union so far.
Germany in particular has high exposure to Russia, and is heavily dependent on it for its energy needs.
"The proximity to the Ukraine crisis does cause European investors to be a bit more circumspect over the issues there, while Wall Street is more distant and seems to be able to push on regardless," Jeremy Batstone-Carr, analyst at Charles Stanley, said.
Batstone-Carr said that concerns over retaliatory moves by Russia, included the possibility that they might switch off gas taps to Europe, made European investors especially nervous.
The pan-European FTSEurofirst 300 was down 0.5 percent to 1,356.22 by 0800 GMT, with the euro zone EuroSTOXX 50 down by 0.8 percent at 3,138.58.
Nicolas Suiffet, technical analyst at Trading Central, said that despite a rebound on Friday, futures on the EuroSTOXX 50 were still capped by resistance.
"As long as 3208 is resistance, look for choppy price action with a bearish bias," Suiffet said.
Providing support to the market was Tesco, up 1.8 percent to add the most points to the FTSEurofirst 300 after it said Chief Executive Philip Clarke would step down, bringing an end to three years in charge.
Rivals WM Morrison and Sainsbury fell 2.2 percent and 1.4 percent as traders said Tesco's new leader may be able to turn Britain's biggest retailer, which has just issued a profit warning, around.
Europe bourses in 2014: link.reuters.com/pap87v
Asset performance in 2014: link.reuters.com/gap87v
Today's European research round-up
(Editing by Jeremy Gaunt)