Europe shares fall; commods dip on China outlook

                                
 * FTSEurofirst 300 index down 0.8 percent
                                
 * Commodities hit by China concerns; Alcoa
                                
 * Tesco gains after trading beats expectations
                                
 By Joanne Frearson
                                
 LONDON, Jan 12 (Reuters) - European shares were lower in
early trade on Tuesday, with commodities weighing after China's
central bank signalled it was tightening short-term liquidity,
and results from U.S. Alcoa <AA.N> disappointed.
                                
 By 0933 GMT, the pan-European FTSEurofirst 300 <.FTEU3>
index of top shares was down 0.8 percent at 1,055.72 points.
                                
 The index gained nearly 26 percent in 2009 and has risen
around 65 percent since reaching its lifetime low last March.
                                
 China's central bank signalled in its open market operations
it was tightening monetary conditions at a faster than expected
pace in response to growing concern about the economy
overheating. [ID:nTOE60B020]
                                
 "Markets have down well so to see a bit of a wobble should
not come as a surprise. But, I think the recent developments in
China could be quite critical," said Mike Lenhoff, strategist at
Brewin Dolphin.
                                
 "If China is trying to take the steam out of lending growth,
this, in turn, might slow developments in the economy and cause
the market to react."
                                
 Energy stocks featured among the worst performers as crude
<CLc1> slipped 0.8 percent. BP <BP.L>, Cairn Energy <CNE.L>,
Royal Dutch Shell <RDSa.L> and Total <TOTF.PA> were down 0.7-1.6
percent.
                                
 Miners also fell back, as metal prices retreated and weak
results from U.S. Alcoa <AA.N> knocked investor sentiment.
                                
 Antofagasta <ANTO.L>, BHP Billiton <BLT.L>, Eurasian Natural
Resources Corporation <ENRC.L>, Rio Tinto <RIO.L> and Xstrata
<XTA.L> were down 1.1-2.1 percent.
                                
 
                                
 TESCO SHINES
                                
 On the upside, food retailers were in demand. Tesco <TSCO.L>
gained 2.4 percent after beating Christmas sales growth
forecasts in its main British market, boosted by its loyalty
scheme and demand for premium foods, adding to signs of healthy
festive spending. [ID:nLDE60A0F7]
                                
 "On the plus side, Tesco had excellent results," said David
Buik, partner at BGC Partners. "I do believe the only sector
worth supporting in the retail is the supermarkets."
                                
 Banks were under pressure following reports in the New York
Times that President Obama was considering levying a tax on the
sector.
                                
 UBS <UBSN.VX>, Deutsche Bank <DBKGn.DE> and Barclays
<BARC.L> were down 1.2-1.6 percent.
                                
 Across Europe, the FTSE 100 <.FTSE> index was down 0.4
percent, Germany's DAX <.GDAXI> fell 0.7 percent and France's
CAC 40 <.FCHI> was 0.5 percent lower.
 (Editing by Dan Lalor)