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* Pan-European FTSEurofirst 300 index down 0.2 pct
* Deutsche Bank, Barclays, fall after updates
* Nokia surges after strong results
* Telecom Italia rallies on stake purchase
By Danilo Masoni and Atul Prakash
MILAN/LONDON, Oct 29 (Reuters) - European shares fell on Thursday, with banking shares leading the way after disappointing updates from Deutsche Bank and Barclays, while investors assessed the negative impact of a U.S. rate hike by year-end.
The pan-European FTSEurofirst 300 index was down 0.35 percent while the euro zone's blue-chip Euro STOXX 50 index fell 0.66 percent.
The U.S. Federal Reserve kept interest rates unchanged on Wednesday but left the door open to a rate hike in December, playing down recent global financial market turmoil.
"European investors are taking profit on risky assets as they start to gauge the end effect of a rate increase," JCI Capital analyst Emanuele Rigamonti said.
Shares in Deutsche Bank fell 7.6 percent after Germany's biggest lender warned of two tough years of dividend cuts, pay restraint and thousands of job cuts.
"Deutsche Bank is cutting its dividend, and the story for the banking sector as a whole is that they are going to struggle to get back to their earlier levels of profitability, given the amount of regulation going on," Clairinvest fund manager Ion-Marc Valahu said.
British bank Barclays was down 6.2 percent following a 10-percent drop in quarterly profits, while Saint-Gobain fell 5.4 percent after saying its results were hit by a contraction in France.
Mining stoks fell 2.4 percent, the biggest decline in Europe, as metals prices extended losses. BHP Billiton , Rio Tinto and Anglo American fell 2.8 to 5 percent.
Telecom Italia soared 7 percent after French tycoon Xavier Niel built a minority stake, setting up a potential power struggle with largest shareholder Vivendi over the Italian phone group's future.
Nokia surged 10 percent after reporting stronger-than-expected profits and announcing a new shareholder return plan.
Telecoms equipment maker Alcatel-Lucent rose 9.7 percent even though it posted a net loss in the third quarter. The company said revenues from its core networking products rose and Nokia's plan to buy it was on track for the first quarter.
Today's European research round-up (Additional reporting by Sudip Kar-Gupta; Editing by Richard Balmforth)