* FTSEurofirst 300 ends 0.5 percent lower
* Barclays falls 4.8 percent, drags down financials
* U.S. housing data dampens sentiment; earnings eyed
By Atul Prakash
LONDON, Oct 20 (Reuters) - European equities retreated from one-year highs to end lower on Tuesday, pressured by weaker than expected U.S. housing data, with a sharp decline in Barclays on a stake sale by Qatar dragging down financials.
Corporate results were mixed and investors awaited more earnings for companies such as Morgan Stanley, Wells Fargo, Amazon, American Express and Cadbury this week for clearer market direction.
The FTSEurofirst 300 index of top European shares closed 0.5 percent lower at 1,021.29 points after hitting 1,031 -- a 12-month high for a fourth straight session.
Financial stocks took the most points off the index, with Barclays falling 4.8 percent after Qatar sold a 1.3 billion pound ($2.1 billion) stake in the British bank, stoking talk it will use a big profit to make a fresh move on UK food retailer J. Sainsbury.
Sainsbury shares jumped 5.4 percent.
Other banks also fell, with HSBC, Royal Bank of Scotland, Credit Agricole, Natixis and Credit Suisse falling 0.7 to 2.2 percent. The DJ STOXX banking index, which has spiked 174 percent since its March lows, fell 0.8 percent.
"Everything that derails the view that the worst is behind us and that the economy will grow strongly in 2010 can hurt the market," said Philippe Gijsels, senior strategist at Fortis BNP in Brussels.
"Today we saw that the U.S. housing data was not that fantastic," he added.
Positive sentiment following forecast-beating results from Texas Instruments and Apple on Monday was dampened by data showing new construction of U.S. homes rose by less than expected in September, held back by a plunge in ground-breaking activity for multi-family homes.
The U.S. Commerce Department said housing starts rose 0.5 percent to a seasonally adjusted annual rate of 590,000 units, below market expectations for 610,000.
FOCUS ON EARNINGS
"Deals are being done and the market is being propped up by a little bit of buying here and a little bit of selling there. However the overriding focus is on the earnings season, which has been mixed to say the least," said Angus Campbell, head of sales at Capital Spreads.
Bank of New York Mellon Corp reported a third-quarter net loss on Tuesday, Coca-Cola posted lower-than-expected revenue, Pfizer registered higher third-quarter profit and Caterpillar beat earnings forecasts.
Dutch grocer Ahold fell 3.7 percent after reporting that sales grew more slowly in the third quarter as food prices fell and recession-hit shoppers switched to cheaper goods.
Drugmakers also came under pressure. AstraZeneca, GlaxoSmithKline, Merck, Roche Holding and Sanofi-Aventis fell 0.1 to 1.9 percent.
Adecco, the world's top staffing company, said it was buying rival MPS Group but its shares fell 5.3 percent.
Deutsche Bank AG was down 1.2 percent. It has agreed in principle to buy some ABN AMRO assets from the Dutch state in a deal which should clear the way for a merger of nationalised banks ABN and Fortis Bank Nederland.
On the positive side, utilities shares were among the top gainers. E.ON, National Grid, RWE, GDF Suez and Centrica rose 1 to 1.5 percent.
The FTSEurofirst index, which slumped 45 percent last year, is still up 23 percent in 2009 and has surged 58 percent since hitting a record low in March this year. But it is down 37 percent from a multi-year high reached in 2007.
Across Europe, Britain's FTSE 100 index, Germany's DAX and France's CAC 40 fell 0.5-0.7 percent. (Editing by David Cowell)