European shares led lower by financials, miners

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* Pan-European FTSEurofirst 300 index down 0.2 pct

* Deutsche Bank, Barclays, fall after updates

* Nokia surges after strong results

* Telecom Italia rallies on stake purchase

By Danilo Masoni and Atul Prakash

MILAN/LONDON, Oct 29 (Reuters) - European shares fell onThursday, with banking shares leading the way afterdisappointing updates from Deutsche Bank and Barclays, whileinvestors assessed the negative impact of a U.S. rate hike byyear-end.

The pan-European FTSEurofirst 300 index was down0.35 percent while the euro zone's blue-chip Euro STOXX 50 index fell 0.66 percent.

The U.S. Federal Reserve kept interest rates unchanged onWednesday but left the door open to a rate hike in December,playing down recent global financial market turmoil.

"European investors are taking profit on risky assets asthey start to gauge the end effect of a rate increase," JCICapital analyst Emanuele Rigamonti said.

Shares in Deutsche Bank fell 7.6 percent afterGermany's biggest lender warned of two tough years of dividendcuts, pay restraint and thousands of job cuts.

"Deutsche Bank is cutting its dividend, and the story forthe banking sector as a whole is that they are going to struggleto get back to their earlier levels of profitability, given theamount of regulation going on," Clairinvest fund managerIon-Marc Valahu said.

British bank Barclays was down 6.2 percentfollowing a 10-percent drop in quarterly profits, whileSaint-Gobain fell 5.4 percent after saying its resultswere hit by a contraction in France.

Mining stoks fell 2.4 percent, the biggest declinein Europe, as metals prices extended losses. BHP Billiton, Rio Tinto and Anglo American fell 2.8to 5 percent.

Telecom Italia soared 7 percent after Frenchtycoon Xavier Niel built a minority stake, setting up apotential power struggle with largest shareholder Vivendi over the Italian phone group's future.

Nokia surged 10 percent after reportingstronger-than-expected profits and announcing a new shareholderreturn plan.

Telecoms equipment maker Alcatel-Lucent rose 9.7percent even though it posted a net loss in the third quarter.The company said revenues from its core networking products roseand Nokia's plan to buy it was on track for the first quarter.

Today's European research round-up (Additional reporting by Sudip Kar-Gupta; Editing by RichardBalmforth)