* FTSEurofirst 300 down 0.2 pct, Euro STOXX 50 down 0.1 pct
* Rheinmetall sinks after slashing outlook
* Nestle rises after unveiling massive buy-back plan
By Blaise Robinson
PARIS, Aug 7 (Reuters) - European stocks dipped in early trade on Thursday, extending a week-long slide as tensions between the West and Russia continued to spook investors.
At 0800 GMT, the FTSEurofirst 300 index of top European shares was down 0.2 percent at 1,321.40 points. The index has dropped about 3.3 percent over the past week.
Germany's DAX index underperformed again, down 0.4 percent. Data showed on Thursday the country's industrial output rose just 0.3 percent in June, missing a forecast rise of 1.3 percent, adding to signals that Europe's largest economy may have stalled in the second quarter.
The DAX, which hit a near-five month low on Wednesday, has lost 10 percent since mid June, hurt by worries that the Ukrainian crisis and sanctions against Russia could derail Germany's economic recovery.
Russian state news agency Ria Novosti said late on Wednesday that Russia will ban all food imports from the United States and fruit and vegetables from the European Union, in an escalation of the economic battle with the West set off by the crisis in Ukraine.
"The market trend is quite bearish at the moment, and we would need a strong positive catalyst to reverse that. All eyes will be on the ECB this afternoon. If the tone is clearly dovish, then it could maybe stop the bleeding on the market," said Alexandre Baradez, chief market analyst at IG France.
Investors awaited the European Central Bank policy meeting and the following press conference by ECB President Mario Draghi, due later in the day. The ECB is set to hold fire on rates as it waits for earlier stimulus measures to gain traction, while keeping an eye on risks from the conflict in Ukraine.
Shares in Rheinmetall sank 7.8 percent as it slashed its 2014 operating profit target after the German government withdrew its approval for a contract with Russia.
Bucking the trend, Commerzbank gained 2.5 percent after Germany's second biggest lender posted an increase in second-quarter earnings due in part to a fall off in bad loans.
Nestle surged 3 percent after the world's biggest food group unveiled an 8 billion Swiss franc ($8.8 billion) share buyback and stood by its full-year sales forecast, after revenue growth in emerging markets picked up in the second quarter.
So far in the earnings season, 54 percent of companies listed on the STOXX Europe 600 have met or beaten analysts forecasts, while on Wall Street, 74 percent of S&P 500 companies have met or beaten consensus, according to Thomson Reuters StarMine.
Around Europe, UK's FTSE 100 index was down 0.2 percent and France's CAC 40 down 0.1 percent, while Portugal's PSI 20 index dropped 2 percent.
Shares in Portugal's largest listed bank Millennium bcp slumped over 10 percent and other banks also fell sharply on investor concerns that lenders will end up paying for the recent rescue of rival Banco Espirito Santo by the state.
"The concerns continue about banks having to foot the bill for saving BES, which is their rival, and institutional investors are apparently selling off shares of Portuguese banks as a whole after the BES debacle," said Jose Novo, a trader at Orey Financial.
Europe bourses in 2014: link.reuters.com/pap87v
Asset performance in 2014: link.reuters.com/gap87v
Today's European research round-up
additional reporting by Andrei Khalip in Lisbon; Editing by Toby Chopra