* Pan-European FTSEurofirst 300 index falls 1.3 pct
* Brazil-focused stocks down as S&P cuts country rating
* Next advances after reporting rise in profits (Adds detail, prices)
By Atul Prakash and Alistair Smout
LONDON, Sept 10 (Reuters) - European shares retreated on Thursday as companies exposed to Brazil came under severe selling pressure after Standard & Poor's downgraded the country's credit rating to "junk" grade.
Shares in French retailer Casino Guichard, which received about half of its 2014 revenue from Latin America, fell 4.4 percent, while Edenred, which generates around half of its profit from Brazil, dropped 5 percent.
Supermarket Carrefour, which gets 14 percent of its annual sales from Brazil, fell 2.2 percent. Other companies that have a significant presence in the country, like Seadrill , Banco Santander, Anheuser-Busch InBev , British American Tobacco, Galp Energia and Unilever, slid between 1.1 percent and 7.1 percent.
"Companies which are heavily exposed to Brazil are clearly not good plays as the resource-dependent economy is contracting and the much-needed investments are likely to get pushed back. All these issues make Brazil a less attractive place to do business," Peter Dixon of Commerzbank said.
"If you are exposed to emerging markets, you have to try to find other markets that are doing better."
The FTSEurofirst 300 index of top European shares was down 1.3 percent at 1,416.96 points by 1420 GMT after rising 1.4 percent in the previous session.
Lingering concerns about the pace of economic growth in China, the world's biggest metals consumer, hit mining stocks, with the STOXX Europe 600 Basic Resources Index falling 1.5 percent. BHP Billiton and Glencore fell 5.6 to 6.7 percent, also hit as they traded without entitlement to their latest dividend payout.
The volatility index VSTOXX, a crude indicator of investor fear, rose 2.3 points.
Chinese manufacturers slashed prices at the fastest rate in six years in August as commodity prices fell and demand cooled. The producer price index retreated 5.9 percent in August from the same period last year, its 42nd consecutive month of decline.
"Chinese producer prices have been slowing for more than three years now so another month of declines shouldn't really come as a great surprise. But the market appears to be hyper-sensitive to Chinese economic data at the moment," said Laith Khalaf, senior analyst at Hargreaves Lansdown.
German utility E.ON fell 7.1 percent after saying it would book a significant net loss in 2015.
On the positive side, Next rose nearly 1 percent after Britain's second-largest clothing retailer by sales value posted a 7.1 percent rise in first-half profit.
Europe bourses in 2015: link.reuters.com/pap87v
Asset performance in 2015: link.reuters.com/gap87v
Today's European research round-up (Editing by Mark Heinrich)