European shares fall on Greek worries, Chinese growth concerns

* FTSEurofirst 300 down 0.7 pct, Athens's ATG down 4.8 pct

* Escalating violence in Ukraine also hits sentiment

* JP Morgan downgrades DAX to 'neutral' from 'overweight'

By Blaise Robinson

PARIS, Feb 9 (Reuters) - European stocks retreated on Monday, hurt by softer-than-expected Chinese trade data and rising concerns about Greece's relations with Europe after its prime minister set out plans to dismantle the country's austerity programme.

Escalating violence in eastern Ukraine also rattled investors, with Germany's DAX falling 1.7 percent. Germany is seen as one of Europe's most exposed economies to Russia, which has been hit by western sanctions over its support of eastern Ukrainian separatists.

Traders also cited a rating downgrade from JP Morgan strategists on the DAX, with the U.S. investment bank reducing its recommendation to 'neutral' from 'overweight', citing among other things the German benchmark's recent strong outperformance.

Greek banking shares tumbled, with Bank of Piraeus falling 14 percent, Alpha Bank (Other OTC: ALBWF - news) down 6.1 percent, Eurobank down 9.6 percent and National Bank (NYSE: NBHC - news) of Greece down 9.8 percent. Athens' benchmark index ATG fell 4.8 percent.

The FTSEurofirst 300 index of top European shares ended 0.7 percent lower at 1,480.01 points.

Along with Germany and Greece, southern European markets also featured among the biggest losers, with Madrid's IBEX down 2 percent and Milan's MIB down 1.9 percent as investors worried Greece's popular anti-austerity movement could spread to Spain and Italy.

In his first major speech to parliament on Sunday, Greek Prime Minister Tsipras laid out plans to dismantle Greece's austerity programme, setting himself on a collision course with his European partners.

"This is brinkmanship. In the end, everybody will probably be sensible but there's a risk of a policy mistake. Part of the problem is both sides feel emboldened," said Ilan Solot, strategist at Brown Brothers Harriman.

"Greece is in a better economic situation than it was before ... and the government has a strong mandate from the people to change. But the EU is emboldened too because there are a lot more backstops than before, the ESM (European Stability Mechanism) is in place, and you can see the contagion is so much smaller. Spanish and Italian yields hardly moved in this crisis."

Worries over China's economy also weighed. Data showed its exports fell 3.3 percent in January while imports tumbled 19.9 percent, far worse than analysts had expected.

Bucking the trend on Monday, shares in Austria's Erste Bank (Other OTC: EBKDY - news) rose 2.8 percent. Hungary's government and the European Bank for Reconstruction and Development (EBRD) will take stakes in Erste Bank's local unit, Hungarian Prime Minister Viktor Orban told a news conference on Monday.

Despite Monday's losses, the FTSEurofirst 300 is up about 8.2 percent in 2015, boosted by expectations the European Central Bank's quantitative easing programme will revive economic recovery and corporate earnings will bounce.

"In every country where the central bank used quantitative easing, there were big equity market rallies, and the euro zone won't be an exception," said Daniel Larrouturou, deputy CEO of Paris-based Diamant Bleu Gestion.

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

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

Today's European research round-up (additional reporting by Chris Vellacott and Atul Prakash in London; Editing by Toby Chopra)