European shares hit 13-month low, Renault slumps on emissions probe

* FTSEurofirst 300 index falls 2.2 pct

* Renault (Xetra: 893113 - news) leads automobile sector down

* Tesco (Xetra: 852647 - news) up on better-than-expected results (Updates with prices, details)

By Atul Prakash and Danilo Masoni

LONDON/MILAN, Jan 14 (Reuters) - European equities slumped to a 13-month trough on Thursday, with the automobile sector leading the market lower as Renault tumbled following inspections at three of its sites in an emissions probe.

The pan-European FTSEurofirst 300 index was down 2.2 percent at 1,324.70 points by 1514 GMT after falling as far as 1,309.74, its lowest level since December 2014.

Shares (Berlin: DI6.BE - news) in the French carmaker were down 10 percent, the biggest decliner in the index, after falling as much as 20 percent earlier in the day. That wiped billions of dollars off its market value, in an echo of the scandal engulfing German rival Volkswagen (Other OTC: VLKAF - news) .

"It (Other OTC: ITGL - news) was almost inevitable that someone else would fall under the eye of investigators, it's just surprising it has taken this long," IG (LSE: IGG.L - news) analyst Chris Beauchamp said.

"There might be a small bounce in Renault in coming days, but as with Volkswagen, the investment case seems to have disappeared for now."

Renault said investigations to date had found "no evidence of a defeat device equipping Renault vehicles", in a reference to a type of software program Volkswagen was found to have used by U.S (Other OTC: UBGXF - news) . investigators.

Volkswagen admitted last year to using software to conceal the level of toxic emissions from some of its diesel vehicles in the United States. That prompted investigations across several countries into Volkswagen, but also into other automobile manufacturers to ensure they have abided by regulations.

"It's hard to believe that VW would have been the only one to have rigged emissions testing," said Clairinvest fund manager Ion-Marc Valahu. "I sold out of European car stocks at the end of last year and the beginning of this month after they had rallied, and I am not planning to get back into the sector."

Renault shares rose more than 50 percent last year, with Peugeot (Other OTC: PUGOF - news) up nearly 60 percent and the Stoxx Europe 600 Autos & Parts Index gaining around 13 percent. But European car stocks have fallen sharply at the start of 2016.

The European automobile index was down 4.3 percent on Thursday, putting further pressure on the broader stock market. Shares in other stocks also fell, with Fiat (Hanover: FIA1.HA - news) and Peugeot falling 9 percent and 5 percent respectively.

Fiat also came under pressure following a report in Automotive News saying two U.S. car dealerships had filed a lawsuit accusing the carmaker of falsifying sales, traders said. The company denied the lawsuit had been served.

Among other sharp movers, weaker than expected results sent Swiss chocolate maker Lindt & Spruengli down 3.2 percent, while Richemont fell 2.2 percent after the Cartier owner said business was likely to remain challenging following a 4 percent quarterly sales drop.

Tesco climbed 4.5 percent as lower prices and more staff helped the British supermarket chain post a better-than-expected result over the Christmas period.

"Tesco further underscores a good UK superstore festive season," Shore Capital analyst Clive Black said.

Mining giant BHP Billiton (NYSE: BBL - news) rose 4.5 percent after upgrades from brokerage firms Morgan Stanley (Xetra: 885836 - news) and Citi. Other miners were also up after recent sharp losses on the back of weaker metals prices, with Anglo American (LSE: AAL.L - news) , Glencore (Amsterdam: GX8.AS - news) and Fresnillo (Other OTC: FNLPF - news) rising 1 to 7 percent. (Reporting by Danilo Masoni; editing by Jeremy Gaunt)