* FTSEurofirst 300 falls 0.1 percent
* Financials, drugmakers among top decliners
* Telecom shares advance
* For up-to-the-minute market news, click on
By Atul Prakash
LONDON, Oct 21 (Reuters) - European shares drifted further away from one-year highs on Wednesday, pressured by financial stocks after Bank of England Governor Mervyn King added his voice to calls for root-and-branch reforms of the sector.
King said on Tuesday in Edinburgh that a fundamental rethink of how the banking sector is structured and regulated is needed to prevent a recurrence of the financial crisis.
The FTSEurofirst 300 index of top European shares fell 0.1 percent to 1,019.94 points by 0845 GMT after dropping 0.5 percent in the previous session. The index, which hit a one-year high on Tuesday before falling, is up 23 percent this year and has surged 58 percent since hitting a record low in March.
Analysts said investors were cautious following the market's inability to post convincing gains in recent days. The index had fallen in five of the previous 10 sessions.
Morgan Stanley and Boeing are due to report results later in the day.
"Markets have taken a breather. Nothing moves in a straight line, so market timing is becoming more and more acute," said John Murphy, analyst at ODL Securities.
"We are entering an intense period. Whilst over the longer term the bulls have clearly taken the lead, the short term appears to be a little more cloudy."
Banks were among the top losers, with Standard Chartered, Lloyds, Royal Bank of Scotland, BNP Paribas, Societe Generale, Credit Agricole and Natixis down 0.1 to 1.3 percent.
Deutsche Bank fell 3.1 percent after the bank said tax credits had flattered net profit in the third quarter..
Drugmakers also came under pressure. AstraZeneca, GlaxoSmithKline, Merck, Novartis, Novo Nordisk and Roche Holding fell 0.1 to 0.9 percent.
Across Europe, Britain's FTSE 100 index, Germany's DAX and France's CAC 40 fell 0.1-0.3 percent.
TELECOMS SUPPORT
On the positive side, telecom shares were in demand. Deutsche Telecom, Vodafone, France Telecom, BT Group and Mobistar rose 0.6 to 1.7 percent.
Britain's Cadbury rose 0.2 percent after it beat sales forecasts and raised targets in a bumper third-quarter trading report, surprising investors and pressuring suitor Kraft to come up with a much bigger bid to win its takeover battle.
"Overall, Cadbury management has successfully laid out its hand ... showing how attractive Cadbury is," said Andrew Wood, senior research analyst at Sanford C. Bernstein.
"And this trading update should put further pressure on Kraft to increase its bid."
Spanish infrastructure company Grupo Ferrovial SA, which has a majority stake in airports operator BAA, fell 4.5 percent. BAA agreed to sell Gatwick Airport for 1.5 billion pounds ($2.46 billion), hoping to bolster its appeal against a competition ruling that it must offload three airports in total.
The sale price is less than the airport's 1.6 billion pound Regulated Asset Base value.
BHP Billiton was down 0.4 percent. The miner confirmed a month-long outage at the world's No. 4 copper mine and reported near flat quarterly output of iron ore.
Top European computer chip maker STMicroelectronics fell 3.1 percent after it posted its seventh consecutive quarterly loss, but its revenue and outlook topped expectations and bolstered hopes the semiconductor industry is on the rebound.
(editing by John Stonestreet)