European shares fall on Fed worries; oil services lead

* FTSEurofirst 300 down 0.8 pct, EuroSTOXX 50 down 1.2 pct

* CGG (NYSE: CGG - news) 's profit warning sparks sell-off in oil services

* U.S. Federal Reserve kicks off key policy meeting

* Longer-term technical uptrend still seen in tact

By Toni Vorobyova

LONDON, Dec 17 (Reuters) - European shares fell on Tuesday, resuming a downward slide seen for much of this month as the U.S. Federal Reserve kicked off a two-day meeting at which it may decide to scale back its equity-friendly stimulus programme.

Oil services shares were among the top losers after a profit warning from French seismic surveyor CGG. CGG shares plummeted 16.9 percent in massive volumes, on track for their biggest one-day percentage drop in five years, also hitting rivals like Technip (Paris: FR0000131708 - news) .

Weakness spread across the sectors, however, with fallers on the pan-European FTSEurofirst 300 index outnumbering risers by around two to one.

The benchmark index, down 4.4 percent since the start of the month, is on track for its first December drop since 2008 as signs of strength in the U.S. economy have raised the possibility that the Fed may taper its bond purchases as soon as the Dec. 17-18 meeting.

Reducing the flood of central bank money that has pushed down interest rates on bonds is likely to make them more popular again relative to equities. Investors are also concerned that if the Fed withdraws its support it could threaten the budding recovery in the world's largest economy.

Tuesday's data, showing a bounce back in the U.S. annual inflation rate - albeit one slightly smaller than expected - gave further weight to the likelihood that the Fed could act soon.

"If they taper, it's going to be quite a significant negative (for equities)," said Gautam Batra, chief investment officer at Signia Wealth.

"We've been vocal since the end of October that the positive data coming is supportive of tapering but the market and consensus is still anywhere between January and March."

The FTSEurofirst 300 closed down 0.8 percent at 1,248.30 points, resuming its sell-off after a bounce higher the previous session. The EuroSTOXX 50 index of euro zone blue chips, meanwhile, fell 1.2 percent to 2,941.76.

After the CGG warning the oil and gas sector was one of the top fallers. Technip - which itself cut full-year sales and margin targets in late October - lost 4.5 percent. Petroleum Geo-Services fell 4.7 percent, with Petrofac (Berlin: P2F.BE - news) down 3.7 percent and Saipem (Other OTC: SAPMY - news) down 2.3 percent.

"The oil-services sector is in a tough spot, with very low visibility on capital expenditures from the big oil companies, which are not sure where oil prices are going," said Bertrand Lamielle, the head of asset management at B*Capital (Other OTC: CGHC - news) .

Signia Wealth's Batra said he had sold out of Technip after the October warning and instead now preferred to focus on investing in the major oil firms themselves.

Hedge funds have upped their short selling of several oil-services companies - selling borrowed shares in anticipation of being able to buy them back more cheaply later and pocket the difference. About 9 percent of CGG shares are out on loan, up from 2.9 percent in late September, according to Markit data.

Overall, though, short interest across European equities remains muted and in coming months both fundamental and technical analysts point to scope for more market gains.

"The up-trend started 5-6 months ago and is still on its way, even if in the last weeks we've had some profit-taking," said Maurizio Milano, chief of technical analysis at Gruppo Banca Sella. "The first support (on EuroSTOXX 50) is at 2,920; in order to preserve a positive outlook for the coming weeks the key-support at 2,800 must hold."