* FTSEurofirst 300 down 0.2 pct
* France's CAC underperforms after LVMH update
* RBS gains 13.5 percent after unexpected surge to profit
By Alistair Smout
EDINBURGH, July 25 (Reuters) - European shares fell on Friday, with French stocks in particular underperforming after a batch of weaker-than-expected earnings reports, ahead of closely followed German sentiment data.
Shares of French luxury-goods group LVMH fell 5.3 percent, the worst performer on the pan-European FTSEurofirst 300, after posting below-forecast second-quarter sales and profits, hit by a drop in demand from China.
The Stoxx Europe Personal and Household goods sector was down 1.3 percent, the biggest sectoral faller, as other luxury firms with China exposure such as Richemont, Burberry and Kering also suffered.
French companies Danone and Lafarge were both in negative territory after missing consensus forecasts.
The blue-chip French CAC-40 index fell 0.7 percent, underperforming the FTSEurofirst 300, down 0.2 percent to 1,379.30, erasing some of the previous session's gains.
Bucking the trend, Royal Bank of Scotland rose 13.5 percent after a surprise swing to profit.
In Europe so far this quarter, 40 percent of companies have missed earnings expectations, according to Thomson Reuters StarMine data, underperforming the United States where the number is 28 percent.
"Overall sentiment remains neutral with investors continuing to prefer US stocks to European ones due the US earnings season having delivered solid and mostly better than expected results so far," said Markus Huber, senior sales trader at Peregrine & Black.
On the data front, market research group GfK found that German consumer morale rose to its highest level since 2006, ahead of the closely watched Ifo business climate survey.
Both the GfK figures and Thursday's encouraging Purchasing Managing Index (PMI) figures, which showed the euro zone's private sector expand at the fastest rate in three months and boosted shares, have raised expectations for the Ifo, out at 0800 GMT, which consensus suggests will come in at 109.4.
"Following yesterday's PMI readings I imagine most analysts will have raised their expectations for (the Ifo) and I think we're likely to get a comfortable beat here," Craig Erlam, market analyst at Alpari, said.
"The only question now is how much more has been priced into the markets."
Europe bourses in 2014: link.reuters.com/pap87v
Asset performance in 2014: link.reuters.com/gap87v
Today's European research round-up
Editing by Tom Heneghan