* ECB cuts rates, lifts size of asset purchase programme
* Shares turn lower as Draghi says more rate cuts unlikely
* Gains in Italy, Spain banks help sector outperform
* Auto, miners, oil stocks lead sectoral fallers (Adds details, closing prices)
By Danilo Masoni and Sudip Kar-Gupta
MILAN/LONDON, March 10 (Reuters) - European shares fell on Thursday after the European Central Bank President Mario Draghi said more rate cuts were unlikely, but bank shares outperformed on plans for a new round of cheap funding.
The pan-European FTSEurofirst 300 index fell 1.8 percent to 1,311.74 points, having earlier risen by as much as 2.6 percent after the ECB surprised investors with rate cuts and an expansion of its asset purchase programme.
Weaker oil prices also weighed on equity markets, sending the oil and gas stocks index down 3.2 percent, while miners also fell by 3.7 percent as copper prices slid on worries about Chinese demand.
Anthilia Capital fund manager Giuseppe Sersale said Draghi's remarks caught investors who were heavily selling the euro by surprise, sending the common currency jumping against the dollar and putting pressure on equities.
"However, regardless of the short-term, minute-by-minute market reaction, we see the stimulus package as very important ... especially the possibility given to banks to tap new long-term funding at zero or negative rates," he added.
Banking sectors stocks also came off earlier highs to end down 0.5 percent.
But some lenders like Banco Popular and Bankia of Spain and Italy's UniCredit and Intesa Sanpaolo managed to end with gains of between 1.7 percent and 4.6 percent. Traders said the new ECB bank funding plan should favour banks in the euro zone periphery.
Auto stocks were the top sectoral loser, down 4.1 percent, as the euro rallied to a three week-high against the dollar on the back of Draghi's comments. The sector is traditionally sensitive to swings in the euro due its heavy export component.
British insurer Aviva rose 1.3 percent after posting higher profits and dividends. Reinsurer Hannover Re climbed 1 percent after it increased its total dividend and its net profit surpassed the billion-euro mark for the first time.
However, Lagardere shares slumped 13 percent after results from the media group underwhelmed investors, while fertiliser group K+S fell 10.4 percent after it warned of a significant drop in operating profit this year.
Today's European research round-up (Editing by Gareth Jones)