European shares cut gains on lower euro zone growth forecasts

* FTSEurofirst 300 index flat by midday trading

* Index cuts gains after European Commission forecasts

* Energy companies fall sharply on weaker oil prices

By Atul Prakash

LONDON, Nov 4 (Reuters) - European shares surrendered early gains on Tuesday after the European Commission cut its growth forecast for the euro zone and said the currency bloc will need another year to reach even a modest level of growth.

In its autumn estimates, the EU executive said the euro zone's economy would expand 0.8 percent this year, 1.1 percent next year and by 1.7 percent in 2016 - a level the Commission said six months ago would be achieved next year.

The delay in the upturn was due to drag on the economy from France and Italy. The euro zone, which generates a fifth of world economic output, holds back a broader global revival led by the United States.

"There is still nervousness in the market about the euro zone's economic outlook," Gerhard Schwarz, head of equity strategy at Baader Bank (Xetra: 508810 - news) in Munich, said.

"Certainly another year of sub-par growth into next year is not something that the market likes because investors have been banking on a recovery in corporate earnings and that might not get materialised in this environment."

The pan-European FTSEurofirst 300 was flat at 1,340.90 points by 1213 GMT after falling into negative territory from an intra-day high of 1,346.49 points.

Analysts said the retreat was not severe as the European Commission's growth forecasts also raised chances of further stimulus measures from the European Central Bank.

On a sector basis, energy firms fell the most, with the STOXX Europe 600 Oil and Gas index falling 2.1 percent, tracking a drop in crude oil to a more than four-year low after Saudi Arabia cut sales prices to the United States.

Royal Dutch Shell (Xetra: R6C1.DE - news) , Total, Tullow Oil (LSE: TLW.L - news) , Statoil (Xetra: 675213 - news) , BG Group (LSE: BG.L - news) and Seadrill fell 2.0 to 6.4 percent.

However, some better-than-expected earnings underpinned the market. Shares (Berlin: DI6.BE - news) in German car parts and tyre maker Continental gained 1.7 percent after saying its profit margin could slightly beat targets this year as core European auto markets keep growing.

Securitas (Other OTC: SCTBF - news) surged 7 percent after the Swedish security firm posted a bigger-than-expected rise in third-quarter core profit, while Banco Santander (Amsterdam: SANT.AS - news) added 0.5 percent after the euro zone's biggest bank posted a 32 percent rise in nine-month net profit.

"Earnings have been better than expected overall, and this is offsetting the bad macro data seen in Europe lately," said Alexandre Baradez, chief market analyst at IG France.

Half way into Europe's earnings season, 65 percent of companies managed to meet or beat profit forecasts, and 57 percent met or beat revenue forecasts, according to Thomson Reuters StarMine data.

In absolute terms, profits are up 12.2 percent, while revenues are down 0.7 percent, highlighting the fact that Europe's earnings rebound has mostly been coming from cost-cutting and lower financing costs.

Europe bourses in 2014: http://link.reuters.com/pap87v

Asset performance in 2014: http://link.reuters.com/gap87v

Today's European research round-up (Additional reporting by Blaise Robinson in Paris)