Europe shares knocked by disappointing U.S. data

* DAX hits lowest level in over a month

* Alstom (Paris: FR0010220475 - news) surges on signs that GE deal to get approval

* European bourses in 2015: http://link.reuters.com/pap87v

* Asset performance in 2015: http://link.reuters.com/gap87v (Updates prices after U.S (Other OTC: UBGXF - news) . data)

By Sudip Kar-Gupta

LONDON, Aug 17 (Reuters) - European stocks lost ground on Monday afternoon, with the German market bearing the brunt of selling after data showed manufacturing activity in New York state shrank to its weakest level in August since 2009.

Benchmark indexes in Paris and Milan held up relatively well, however, with shares of French industrial group Alstom (Swiss: 2229080.SW - news) outperforming on bets its takeover will be approved.

The pan-European FTSEurofirst 300 index, which fell 3 percent last week, was down 0.1 percent while the euro zone's blue-chip Euro STOXX 50 index was down 0.3 percent. The DAX hit its lowest level in over a month and was down 0.8 percent at 1407 GMT.

"The (U.S.) data was worse than expected and the DAX is bearing the brunt of it," a London-based trader said.

Alstom shares rose 7 percent after two people familiar with the matter told Reuters that General Electric was expected to get EU approval for a proposed 12.4 billion-euro ($13.8 billion) bid for Alstom's power business.

Shares (Berlin: DI6.BE - news) in Hennes & Mauritz advanced 1.1 percent after the fashion retailer reported higher sales.

Europe's second-quarter earnings season has been one of the best in five years, supporting dividends.

"Despite a constant 'wall of worry' Europe is delivering on growth," UBS (NYSEArca: FBGX - news) strategist Joao Toniato wrote in a note to clients.

"European profit margins are expected to improve in 2015. And the recovery is being driven by Italy and Spain."

Carmaker BMW rose 0.2 percent and other European automakers rose after Barclays (LSE: BARC.L - news) analysts said that even though the Chinese economy was slowing, the worst-case scenario had already been priced in for BMW (Swiss: BMW.SW - news) .

Equity strategists at JP Morgan said China's currency devaluation last week was not a game changer for stocks. "We remain bearish on commodity equities, but believe the weakness in consumer plays should not continue," strategist Mislav Matejka said.

Both the Euro STOXX 50 and FTSEurofirst are up around 10 percent since the start of 2015, as economic stimulus measures from the European Central Bank have helped to counter worries over China and Greece's debt problems.

Despite the prospect of a confidence vote after some lawmakers from the ruling Syriza party rebelled over a new bailout deal, the Athens stock market was up 0.4 percent, having given up the bulk of earlier gains. The index has slid nearly 20 percent since the start of 2015.

Today's European research round-up (Editing by Digby Lidstone and Ruth Pitchford)