European shares fall for 3rd day, telecoms disappoint

* FTSEurofirst 300 index falls 0.9 percent

* Vodafone down 5.8 pct, leads telecoms lower

* BG slips 15.3 pct after warning on production

By Atul Prakash

LONDON, Jan 27 (Reuters) - European shares slipped to their lowest in more than a month on Monday, extending last week's sharp declines on worries about emerging economies and the pace of growth in China.

Telecom (Frankfurt: NZT.F - news) and energy stocks were hit hard after U.S. mobile operator AT&T (NYSE: T - news) said it was not planning to take over the British group Vodafone. The STOXX Europe 600 European telecoms index was down 2.4 percent.

Energy shares fell 2.3 percent, led by BG which warned production this year and next would fall short of expectations. BG shares fell 15.3 percent, the top faller in Europe, while Vodafone was down 5.8 percent.

Investors braced for a volatile week when the U.S. Federal Reserve is expected to pursue its gradual reduction of the bond-buying stimulus which helped equities last year and pushed indexes to multi-year highs.

At 1119 GMT, the FTSEurofirst 300 index of top European stocks was down 0.9 percent at 1,289.20 points after falling to a low of 1,289.08, the lowest since late December.

"With China growth concerns in the background, further Fed tapering lurking and emerging market currencies struggling, naturally investors are worried and taking some profits off the table after recent strong gains," Tom Robertson, senior trader at Accendo Markets, said.

"No doubt any sharp pull-back will be met with a surge in buying as investors hunt for value, but they are trading cautiously at the moment."

European stocks suffered their biggest one-day fall in seven months on Friday, with the FTSEurofirst 300 falling 2.4 percent and Spain's IBEX dropping 3.6 percent on concerns about economies and currencies in Latin America.

Emerging market currencies from Turkey to Argentina were dumped last week, making investors nervous that the shakeout in markets could lead to a full-blown financial crisis, particularly given the turn in Fed policy.

"There is clear risk-off trade going on at the moment and it's all to do with stresses in the emerging markets," Daniel McCormack, strategist at Macquarie said, adding there were concerns that those emerging market economies which were short of capital would find it harder to fund themselves, slowing growth.

"With these headwinds in place, the equity market will generally struggle to push higher."

Banking shares also came under pressure on concerns about their capital levels, with the STOXX Europe 600 banking index falling more than 1 percent.

"Sudden fears about emerging markets and also potential capital shortfalls for some European banks are rattling investors. People have been a bit complacent lately, so it's quite logical to get a correction," said David Thebault, head of quantitative sales trading at Global Equities.

German weekly WirtschaftsWoche reported, citing a new study by the Organisation for Economic Cooperation and Development (OECD), that European banks have a combined capital shortfall of about 84 billion euros ($115 billion).

Among other significant decliners, Germany's Merck (Dusseldorf: 6MK.DU - news) fell 10.3 percent after its finance chief Matthias Zachert resigned to return to synthetic rubber maker Lanxess (Other OTC: LNXSF - news) .

Today's European research round-up

Asset returns in 2013:

European equities with emerging exposure