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* FTSEurofirst 300 index falls 1.1 percent
* IAG shares down on weaker demand outlook
* Restaurant Group slumps after profit warning
By Atul Prakash
LONDON, April 29 (Reuters) - European equities fell sharply on Friday and headed for their biggest weekly decline in one month, with the travel and leisure stocks leading the market lower after updates from British Airways-owner IAG and Restaurant Group.
The STOXX Europe 600 Travel and Leisure index fell 2 percent, the top sectoral decliner, putting pressure on the broader market.
International Airlines Group fell 4 percent, the top decliner in the FTSEurofirst 300 index, after saying it would moderate its capacity expansion in the short term in response to weaker overall demand, despite reporting a forecast-beating rise in first-quarter profit.
Britain's Restaurant Group, which operates chains such as Chiquito and Frankie & Benny's, slumped 23 percent after warning on full-year profit outlook as it does not expect any improvement in trading conditions in the short term.
Spanish lender Bankia fell 1.7 percent after posting a 3.3 percent fall in first quarter net profit from a year earlier as lower provisions offset pressure from low interest rates.
"Weaker earnings are starting to become a problem. Companies that disappoint are being punished disproportionately, while those that surprise on the positive side shoot up, indicating that markets are nervous and have little patience with underperformance," Philippe Gijsels, head of research at BNP Paribas Fortis said.
The pan-European FTSEurofirst 300, which hit a three-month high last week, was down 1.1 percent by 0824 GMT. It has fallen more than 1 percent so far this week and remained on track to record its biggest weekly loss in one month.
Shares in Swiss money manager GAM, Swedish engineering group Sandvik and German airline group Lufthansa fell 4.2 to 5.8 percent as their shares traded without the attraction of latest dividend payouts.
Among mid-caps, Ophir Energy slumped 17 percent after the oil and gas explorer said it had ended talks to bring Schlumberger on board as a partner on its Fortuna project in Equatorial Guinea.
On the positive side, Danish wind turbine maker Vestas rose 4.2 percent, the top gainer in the FTSEurofirst 300 index, after posting a stronger-than-expected first-quarter operating profit before special items and maintained its 2016 forecasts.
Today's European research round-up
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Mike Dolan, Markets Editor EMEA.