UPDATE 2-Downbeat Swedish earnings, oil slide hurt European shares

* Swedish stocks hit by a raft of weak results
* Swiss stocks outperform as Swatch results help
* Oil, banks hit STOXX 600

(Updates to close)
By Sruthi Shankar and Amy Caren Daniel
July 17 (Reuters) - European stock markets lost ground on
Wednesday after three straight days of gains, with Swedish share
prices hit by a slew of poor quarterly results and oil majors
across the region reeling from this week's slide in oil prices.
The pan-European STOXX 600 .STOXX ended down 0.4%, with
Stockholm-listed shares .OMXSPI suffering their biggest
percentage loss since May on falls for Ericsson ERICb.ST ,
Swedbank SWEDa.ST and engineering group Alfa Laval ALFA.ST .
European banks underperformed broadly as quarterly results
from Wall Street lenders raised questions about the sector's
profitability going forward if major central banks proceed with
more cuts in interest rates to fight a global slowdown.
"The fear is that if they (net interest margins) are
softening, what is it going to look like if we do get these
interest rate cuts," said David Madden, market analyst at CMC
Markets in Britain.
"The perception is that banks are going to be under pressure
and that is going to spread out in the sector as a whole."
Traders expect the U.S. Federal Reserve to embark on a new
cycle of monetary easing next week, while the European Central
Bank is also expected to keep the door open to more stimulus
measures as trade disputes take a toll on growth. After a bullish six weeks driven by expectations of a series
of those kinds of moves, however, doubts have begun to emerge
about whether the U.S. economy, for example, may really need as
many as the three quarter-point rate cuts markets have been
pricing in.
At the same time, investors remain deeply concerned about
President Donald Trump's trade wars and their impact on growth.
Trump said on Tuesday that a deal with China was a long way off
and that he could still impose tariffs on an additional $325
billion worth of Chinese goods if needed. "There is a small bit of fear in relation to Trump's
comments. It showed that the trade deal was unresolved and
encouraged profit taking," said Madden.
The biggest percentage loser among European sectors was the
oil and gas sector .SXEP , down 2%, as energy heavyweights BP
BP.L and Total TOTF.PA were hit by the slide in the oil
price to a one-week low on Tuesday. O/R
Swiss stocks .SSMI were a bright spot with shares in
Swatch UHR.S jumping 6%, its strongest performance in more
than six years after the watchmaker issued a positive outlook
for its biggest markets. Dutch chipmaker ASML ASML.AS also rose 5.2% after it
reported better-than-expected quarterly results and kept to its
forecast of solid growth for the rest of the year. The banking sector .SX7P fell 1.5%, led by Swedish banks.
Handelsbanken SHBa.ST fell on poor results, while Swedbank
SWEDa.ST slipped after cutting its shareholder pay-out policy.
Ericsson fell about 12%, the most on the STOXX 600, after
warning costs related to winning new contracts for its network
business would hit profit margins later this year.