* FTSEurofirst 300 falls 0.5 percent after six-session rally
* Banks under pressure, results of Irish bank tests eyed
* For up-to-the-minute market news, click on
By Atul Prakash
LONDON, March 31 (Reuters) - European shares retreated on Thursday after six straight days of gains as caution ahead of the results of Irish bank stress tests pressured financials, though analysts stayed positive on the stock market's outlook.
Charts showed a key stock index was likely to consolidate in a broad range for some time before hitting new highs, while fund managers said an improving economic outlook and encouraging company earnings were set to support equities going forward.
At 1140 GMT, the FTSEurofirst 300 index of top European shares was down 0.5 percent at 1,128,76 points.
The STOXX Europe 600 Banking index dropped 1.6 percent, with KBC Groep, which has exposure to Irish loans, down 3.8 percent and Credit Agricole down 2.6 percent.
The Irish Independent newspaper said the Irish government would announce a radical restructuring of the country's banking sector after the stress test results later in the day.
Bank of Ireland and Allied Irish Banks shares were suspended from trading, pending publication of the test results.
"If the stress tests increase transparency and we know how much capital is needed to put those banks on a firmer footing again, then that should be positive," said Klaus Wiener, chief economist at Generali Investments, which manages $465 billion.
"As long as the problem is confined to some countries, I am not too concerned. It remains challenging, but the amount of money needed to protect them and to provide the financing that is needed is not beyond anything that EMU couldn't shoulder," he said, referring to the Economic and Monetary Union.
But investors were cautious. A downgrade of Portuguese banks by Standard & Poor's also hurt sentiment. Deutsche Bank said it believed some Portuguese banks could be in trouble and added it had made the right adjustments to its exposure to Portugal, Ireland, Italy and Greece.
The FTSEurofirst 300 index, down 3.4 percent so far in March, is set to post its biggest monthly losses since May 2010, but is on course to post its third straight quarter of gains.
TECHNICAL OUTLOOK
Charts showed the stock market stayed in its uptrend channel.
"We are in a choppy uptrend rather than in a dynamic uptrend," said Phil Roberts, chief technical strategist at Barclays Capital, who tracks the Euro STOXX 50 index, the euro zone's blue chip index, which fell 0.4 percent to 2,023.70 points.
"Medium-term outlook still looks quite bullish. We are in a period of consolidation that is probably going to take place between 2,700 points and 3,100 points and we could be in that range for a month or so before setting new highs,"
Charts showed near-term resistance at around 2,940 points -- its 61.8 percent retracement of a fall from a high in February to a low in March.
A break above the level could open the door for an advance towards 3,000. Support was seen at around 2,884.
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 for clues on the state of the economic recovery.
"Equities have coped with a world of worry but are also receiving a clear and consistent message. Far from the global economy being derailed, the message is that recovery is for real, and the outlook is strong and enduring," said Philip Isherwood, strategist at Evolution Securities.
The retail sector also featured among the worst performers, with the STOXX Europe 600 Retail down 1 percent. Hennes & Mauritz's lost 3.3 percent after the budget fashion giant first-quarter earnings came in lower than expected.
Telecom shares were down 0.7 percent. (Additional reporting by Simon Jessop; Editing by Hans Peters)