Banks, miners lead Europe lower on economic woes

* FTSEurofirst 300 falls sharply, led by financials * Mining sector lower on economic concerns

* All eyes on U.S. non-farm payrolls at 1230 GMT

By Joanne Frearson

LONDON, Sept 5 (Reuters) - European shares fell in early trade on Friday, extending losses from the previous session, as investors sold banking and mining stocks amid intensified worries over the global economy.

At 0838 GMT, the FTSEurofirst 300 index of top European shares was down 1.6 percent at 1,133.30 points.

Royal Bank of Scotland (RBS.L: Quote, Profile, Research, Stock Buzz), Banco Santander (SAN.MC: Quote, Profile, Research, Stock Buzz), BNP Paribas (BNPP.PA: Quote, Profile, Research, Stock Buzz) were all down between 1-3 percent and ranked among the top negative weights on the benchmark.

European shares lost 2.6 percent on Thursday and sparked a global equities decline after European Central Bank projections showed a cut in growth expectations compared with their last prognosis three months ago.

The ECB also unveiled tougher rules on the assets banks can submit as collateral in central bank lending operations, hurting bank stocks.

"There are also concerns following European Central Bank President Jean-Claude Trichet'scomments that funding for the financial sector is likely to be restricted," said Justin Urquhart Stewart, director at 7 Investment Management.

"Investors are still shell-shocked after yesterday's comments by Bill Gross, chief investment officer at Pimco that the financial system was heading into becoming a financial tsunami," added Urqurhart Stewart.

Gross said on Thursday that the U.S. government should give the Treasury the right to buy debt and other assets to halt a "financial tsunami".

Miners also weighed heavily on the European index, BHP Billiton (BLT.L: Quote, Profile, Research, Stock Buzz), Kazkhmys (KAZ.L: Quote, Profile, Research, Stock Buzz), Anglo American (AAL.L: Quote, Profile, Research, Stock Buzz) and Eurasian (ENRC.L: Quote, Profile, Research, Stock Buzz) were trading down between 2.5-6.8 percent as copper futures slumped more than 3 percent.

Also under pressure were exporting companies hurt by a weak euro with the automobile sector one of the weakest sectors in Europe.

Daimler (DAIGn.DE: Quote, Profile, Research, Stock Buzz), BMW (BMWG.DE: Quote, Profile, Research, Stock Buzz), Peugeot (PEUP.PA: Quote, Profile, Research, Stock Buzz) and Fiat (FIA.MI: Quote, Profile, Research, Stock Buzz) all fell 0.8-1.5 percent.

A standout loser on the FTSE was Sainsbury (SBRY.L: Quote, Profile, Research, Stock Buzz) down 3 percent as Deutsche Bank cut its rating on the the group to "sell" from "hold" with a price target cut to 310 pence from 335 pence.

Across Europe, Britain's FTSE .FTSE, Germany's DAX .GDAXI and France's CAC .FCHI all suffered falls of around 1.5 percent.

RETAIL PAIN

Retailers in Europe were also feeling the pinch from worries over diminished consumer spending with Carrefour (CARR.PA: Quote, Profile, Research, Stock Buzz) and Inditex (ITX.MC: Quote, Profile, Research, Stock Buzz) trading between 0.8-1.4 percent lower.

"Retail will also come under pressure on concerns that growth is slowing," said Urquhart Stewart.

Looking at the upside, Unilever (ULVR.L: Quote, Profile, Research, Stock Buzz) gained 2 percent as UBS upgraded its target on the group to "neutral" from "sell" and raised its price target to 1,600 pence from 1,395.

In Germany, Metro (MEOG.DE: Quote, Profile, Research, Stock Buzz) was the standout riser, up 0.25 percent with UniCredit saying the German retailer's market entry in Kazakhstan, announced on Thursday, is good news.

Pharmaceutical stocks were outperforming the market as Deutsche Bank raised its target price on AstraZeneca (AZN.L: Quote, Profile, Research, Stock Buzz) to 2,610 pence from 2,450 pence.

Peers Sanofi-Aventis (SASY.PA: Quote, Profile, Research, Stock Buzz) and Roche (ROG.VX: Quote, Profile, Research, Stock Buzz) were higher by around 0.5 percent.

The release of U.S. non-farm pay rolls will be on the economic calender later Friday at 1230 GMT.

"Investors will be anticipating the worst for the U.S. non-farm pay rolls. There is little reason to rally.," added Urquhart Stewart.

U.S. private employers cut 33,000 jobs in August, according to a private report by ADP Employer Services that may not bode well for the non-farm payroll data. Consensus estimates peg the number of jobs lost in August at 75,000.

(Reporting by Joanne Frearson; Editing by Sharon Lindores)