European shares drop sharply; traders cite China regulation concerns

* FTSEurofirst 300 down 1.3 pct

* China trading clampdown hits futures and rocks Europe

* Options expiry and Bloomberg outage add to volatility

* SKF slumps after forecasts flat demand

By Alistair Smout and Francesco Canepa

LONDON, April 17 (Reuters) - European shares extended losses on Friday, with traders pointing to weakness in Chinese futures markets as one of the drivers of the fall on a trading day also marked by an outage on Bloomberg financial terminals.

The FTSEurofirst 300 was down 1.3 percent at 1,614.38 points by 1115 GMT. The Frankfurt DAX was down 1.8 percent, with some traders also pointing to the expiry of futures and options on European indexes as a factor exacerbating market volatility.

Traders said weakness in Chinese futures markets fuelled the drop in Europe and was related to market chatter about further regulatory changes on trading in China, including a clampdown on margin trading.

"The securities regulator is encouraging short-selling to institutional investors, and they are going to stop margin trading on OTC," Ioan Smith, managing director of KCG Europe, said.

"Traders had to catch up with that news after the Bloomberg terminals came back online, and that's when we saw the falls in Europe."

Some investors also cited concern over Greece's stand-off with international lenders. However Greece's ATG index outperformed the rest of Europe, down just 0.9 percent.

Disappointing corporate reports also hindered the market, with shares in bearings maker SKF down 7.1 percent after the Swedish company forecast flat demand for its products in the second quarter.

Crop chemicals group Syngenta (Xetra: 580854 - news) declined by 4.3 percent after reporting lower sales.

Both SKF and Syngenta were among the worst performers on the pan-European FTSEurofirst 300 index, which has risen around 18 percent since the start of 2015.

The drop in the market saw the index down 1.9 percent, set for only its second weekly fall since the end of January.

Britain's FTSE 100 fell 0.8 percent, down 1.2 percent for the week.

Only 5 stocks on the FTSEurofirst 300 were in positive territory, with French electronic systems company Thales edging 0.2 percent to outperform the market after Goldman Sachs (NYSE: GS-PB - news) raised its rating on the company to "buy" from "neutral".

Europe bourses in 2015: http://link.reuters.com/pap87v

Asset performance in 2015: http://link.reuters.com/gap87v

Today's European research round-up

(Editing by Andrew Roche)