* FTSEurofirst 300 index falls 0.5 percent
* ArcelorMittal drags down basic resources shares
* Banks down; UBS slips on investment bank losses
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By Atul Prakash
LONDON, Oct 26 (Reuters) - European equities fell on Tuesday as basic resources shares slipped after ArcelorMittal forecast extended weakness for the sector, while UBS led financials down following losses at its investment bank.
At 0814 GMT, the FTSEurofirst 300 index of top European shares was down 0.5 percent at 1,086.29 points after rising 0.3 percent on Monday to hover near a six-month high.
ArcelorMittal fell 4.6 percent after the world's largest steelmaker predicted a far weaker-than-expected fourth quarter due to muted demand, lower prices and higher raw material costs. BHP Billiton, Anglo American and Xstrata fell 0.9 to 1.4 percent.
"There are going to be some headwinds for companies," said Koen De Leus, strategist at KBC Securities, in Brussels.
"You had high productivity which boosted margins, but what you see now is that companies have problems in passing on high raw material prices to the customers and that's going to put pressure on their margins."
Financial stocks also featured among the top losers, with the STOXX Europe 600 banking index falling 1 percent mainly because of a 4.9 percent drop in shares in Switzerland's largest bank UBS as losses at its investment bank spoiled the company's third-quarter results.
Standard Chartered, Barclays, BNP Paribas and Deutsche Bank fell 0.7 to 2 percent.
Across Europe, the FTSE 100, Germany's DAX and France's CAC 40 fell 0.4 to 0.8 percent.
QUANTITATIVE EASING
Investors stayed cautious ahead of the next week's meeting of the U.S. Federal Reserve, which is expected to pump more money into the economy, but there was no clear consensus on how much cash it might inject.
New York Fed President William Dudley said whether an incremental or big-bang approach to asset purchases would work better depended on the economic context.
"We had a rally since August and now people are waiting to see whether this quantitative easing is going to come through or not. There are still some uncertainties and the (stock) market is going to be range-bound until the meeting of the Fed," De Leus said.
Among individual movers, Germany's Merck KGaA fell 0.8 percent after it cut its full-year sales outlook on slower demand for its liquid crystal (LC) chemicals for flat screens.
Dutch telecoms group KPN rose 1.4 percent as it said it would meet its full-year target after reporting better-than-expected third-quarter results driven by higher service revenue growth in Germany and strong margins.
ARM Holdings fell 3.4 percent after the chip designer reported its third-quarter results and as one of its U.S. licensees, Texas Instruments, warned that its fourth-quarter revenue will be hurt by slowing demand.
"While ARM has a great business model and remains well placed to outperform the broader semiconductor industry, it is ultimately a play on the semiconductor market and dependent on the end consumer demand," Execution Noble said in a note.
(Editing by Erica Billingham)