* FTSEurofirst 300 index down 0.1 percent
* KBC Groep falls ahead of Irish bank tests
* H&M slips as Q1 misses forecasts
* For up-to-the-minute market news, click on
By Joanne Frearson
LONDON, March 31 (Reuters) - European shares slipped on Thursday as investors traded cautiously ahead of the Irish bank stress tests results, with banking stocks reversing earlier gains, while H&M fell after earnings missed forecasts.
By 0928 GMT, the pan-European FTSEurofirst 300 index of top shares was down 0.1 percent at 1,133.32 points, but the index is still on track to end the quarter higher.
Investors will be closely watching the Irish bank stress tests results, with media reports indicating the Irish government is set to announce a radical restructuring of the industry.
Bank of Ireland and Allied Irish Banks shares were suspended from trading, pending the results of the stress tests, due to be published at 1530 GMT, as well as any subsequent announcements by the individual banks.
On Wednesday, bancassurer Irish Life & Permanent was suspended following media reports the bank stress tests might force it into state control.
"Irish banks have been suspended from trading and if the results show that Irish Life & Permanent needs state control it will have a knock on effect on sentiment for the banking sector," Will Hedden, sales trader at IG Index said.
"Banking stocks will be impacted."
The banking sector, featured among the worst performers, with the STOXX Europe 600 Banks down 0.7 percent. KBC Groep, which has exposure to Irish loans fell 3.7 percent, while Credit Agricole slipped 1.5 percent.
"I think you go straight to the stocks that have the poorest quality balance sheets, and that's Credit Agricole and KBC," said a trader at a leading U.S. investment bank.
"It's specifically tied into Core Tier 1 ratios, so people just revisit that."
Irish bond yields were expected to remain elevated, but Ireland's ISEQ index gained 0.7 percent.
In other euro zone peripheral countries Spain's IBEX, Portugal's PSI and Italy's FTSE MIB fell 0.6 to 0.7 percent.
H&M DROPS
Elsewhere, the retail sector featured among the worst performers, with the STOXX Europe 600 Retail down 1 percent. Hennes & Mauritz's lost 4.2 percent after the budget fashion giant first-quarter earnings came in less than expected.
On the upside, Europe's biggest tour operator TUI Travel gained 1.5 percent after it said summer bookings were up on the previous year in its key markets.
Elsewhere, the chemical sector was in demand after Deutsche Bank upgraded it to "overweight" from "neutral" given the improving background in China and the reduced scope for economic surprise in the US in the short term.
The brokers top picks included BASF, Croda and Lanxess, which gained 0.4 to 1.2 percent.
Later in the session, investors will watch U.S. weekly jobless claims numbers, due at 1230 GMT, March Chicago PMI data, due at 1345 GMT, and February U.S. factory orders data, scheduled for release at 1400 GMT, which all should give clues on the state of the recovery.
Across Europe, the FTSE 100 index was up 0.1 percent, Germany's DAX was 0.2 percent higher and France's CAC 40 was down 0.1 percent. (Additional reporting by Simon Jessop; Editing by Jon Loades-Carter)