Spain and Italy outperform weaker European stock markets

* FTSEurofirst 300 edges down 0.1 pct to 1,295.61 points

* Euro STOXX 50 closes down 0.1 pct at 3,044.34 points

* Madrid buoyed by solid Spanish bond sale

* Italy privatisation plans lift Milan bourse

* Goldman sees more gains for European equities in 2014

By Sudip Kar-Gupta

LONDON, Nov 21 (Reuters) - European shares edged lower on Thursday as worries resurfaced over an eventual scaling back of U.S. economic stimulus measures, but the Spanish and Italian markets outperformed.

Despite the pullback, many investors and traders were confident the broader equity market rally would continue into 2014, with Goldman Sachs (NYSE: GS-PB - news) forecasting more gains for the European and UK stock markets next year.

The pan-European FTSEurofirst 300 index, which hit a 5-year high of 1,316.42 points earlier this month, dipped 0.1 percent to 1,295.61 points.

The euro zone's blue-chip Euro STOXX 50 index also slipped 0.1 percent to 3,044.34 points and the pan-European STOXX 600 index fell 0.2 percent to 322.42 points.

Traders said the decline was driven mainly by fresh signals from the U.S. Federal Reserve that it may start scaling back monetary stimulus measures in the next few months.

However, Milan's FTSE MIB (Milan: FTSEMIB.MI - news) equity index withstood the broader fall to close 0.6 percent higher, while Spain's IBEX also advanced by 0.4 percent.

The Madrid stock market was buoyed by strong demand at a Spanish bond sale on Thursday, while Italy's plans to raise up to 12 billion euros ($16 billion) from privatisations lifted the Milan exchange.

"Madrid is standing quite strong - this is due to the great result of their debt auction. This is good news considering how deep in trouble the country was," said Varengold Bank (Xetra: 547930 - news) sales trader Anita Paluch.

Spain and Italy are slowly recovering from the euro zone's sovereign debt crisis, which hit their economies hard, and this has reinforced expectations among investors for a broader European economic recovery extending into 2014.

The FTSE MIB is up by around 16 percent since the start of 2013 while the IBEX is up by 17 percent, with both performing broadly in line with a 15 percent rally in the STOXX 600 index.

Goldman Sachs expected the STOXX 600 to continue to advance and end 2014 at the 360-point level, as European companies start to benefit from the broader economic recovery.

"After three years of virtual stagnation, we expect European profits to grow 14 percent in 2014, driven by an improvement in global growth and some rise in margins," said Goldman's chief global equity strategist Peter Oppenheimer.

"The case for equities as a 'Long Good Buy' continues in our view," he added.