* Pan-European index down almost 10 pct this year
* Markets extend losses after weak U.S. services data
* Syngenta rises after agreeing on ChemChina bid
* Fortum, Novo, KPN hit by weak earnings update
* Italian lenders lead bank sector lower (Adds details, updates prices)
By Danilo Masoni and Sudip Kar-Gupta
MILAN/LONDON, Feb 3 (Reuters) - European shares fell sharply on Wednesday as disappointing economic data from the United States further undermined sentiment already hurt by weak earnings updates.
Data showed the service sector in the world’s No.1 economy slowed more than expected in January, raising worries weakness in manufacturing is spreading to other sectors.
The pan-European FTSEurofirst 300 index, which slid 2 percent on Tuesday, ended down 1.6 percent, bringing the decline so far this year to almost 10 percent.
“Sentiment has weakened materially and is being undermined by mounting worries over global economic growth spanning from China to the U.S., where initial signs of a possible recession are starting to emerge,” JCI analyst Emanuele Rigamonti said.
“We expect markets to trade mostly sideways until the March ECB meeting, which once again might turn out to be a catalyst for a relief rally.”
Finnish state-controlled utility Fortum slumped 13 percent after fourth-quarter earnings dropped more expected and dividend fell short of expectations.
Danish drugmaker Novo Nordisk fell 7.6 percent after cutting its long-term profit growth target, while Dutch telecoms group KPN fell 1.2 percent after reporting worse-than-expected core earnings.
However, Syngenta rose 2.7 percent after China’s state-owned group ChemChina agreed to buy the Swiss company for $43 billion, the largest overseas acquisition by a Chinese company. Syngenta remained below the agreed price with some brokers saying the deal carried high execution risks.
“There are still risks for the deal which might delay the takeover process,” Baader Bank said in a note, citing political headwinds in Switzerland and possible moves by competitors to make the takeover more difficult.
Luxury goods group LVMH also climbed 4.5 percent after reporting fourth-quarter sales grew more than expected, but watch-maker Swatch tumbled after it reported lower profits and sales.
Of the companies on the European STOXX 600 index that have reported earnings so far, 57 percent have beaten or met market expectations and 43 have missed, according to data from Thomson Reuters StarMine.
“It’s been a very mixed bag on the earnings front. Personally, I think a lot of them have been quite disappointing,” said Terry Torrison, managing director at Monaco-based McLaren Securities.
Banks declined 3.4 percent, making them the top sectoral faller with Italian lenders leading the way on uncertainty over Rome’s plans to help them offload bad loans and after analysts at Citigroup issued a downbeat note.
Shares in Italy’s Monte dei Paschi, UBI, Banco Popolare and UniCredit all down by between 6 and 10 percent.
The FTSEurofirst has lost 9.8 percent this year. World stock markets in general have been hit by signs of a slowdown in China, the world’s second-biggest economy and a major consumer of oil and metals.
Today’s European research round-up (Editing by Alison Williams)