(Repeats to correct typographical error)
* FTSEurofirst 300 falls 1.7 pct; lowest close in five weeks
* Euro zone debt concerns hurt sentiment; banks, autos fall
* Charts bearish near term; long-term outlook seen positive
By Atul Prakash
LONDON, May 23 (Reuters) - European shares hit a five-week closing low on Monday as a cut in credit ratings for Greece and a "negative" outlook for Italy raised concerns about the euro zone's continuing debt crisis.
Charts sent a near-term bearish signal and the Euro STOXX 50 volatility index <.V2TX> jumped 11 percent to a two-month high, indicating a fall in investors' appetite for equities. But a fund manager said longer-term market outlook stayed positive.
The FTSEurofirst 300 <.FTEU3> index of top European shares finished 1.7 percent weaker at 1,116.52 points, the lowest close since mid-April. It turned negative for 2011 and was down 0.5 percent. Autos, banks and commodities were among the top losers.
Sentiment also worsened following dismal data showing the global economic recovery remained fragile, and as a setback seen by Spain's ruling Socialists in regional and municipal elections put more pressure on the government, which is fighting to avoid having to seek a bailout like Greece, Ireland and Portugal.
"There is just very little reason to buy this market. People are using these aspects as an excuse for a sell-off. It's going to be a very volatile summer and we think that we have already seen the highs at least over the next few months," an equity trader in London said, referring to the euro zone debt crisis.
"Hedge funds are pushing these things around. In the short term we will be going lower on the back of a stronger dollar and weaker commodities."
Standard & Poor's cut on Saturday its rating outlook for Italy to "negative" from "stable", citing weak growth prospects and increased risks it would fail to slash its debt mountain. The move came a day after a three-notch rating cut in Greek debt by Fitch.
"What is clearly unnerving markets at the moment is just how unquantifiable the euro zone crisis still is," said David Jones, chief market strategist at IG Index.
"Traders are bracing themselves for any rallies to be just too tempting for further sellers and the risk of further weakness in the days ahead."
Italy's FTSE MIB <.FTMIB> fell 3.3 percent and Greek shares <.ATG> dropped 1.3 percent. The Thomson Reuters Peripheral Eurozone Countries Index <.TRXFLDPIPU> was down 3.5 percent.
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Other euro zone crisis stories [ID:nLDE68T0MG]
Breakingviews column on Spain [ID:nLDE74M0IX]
Analysis on Europe's austerity backlash [ID:nLDE74G137]
Graphics on Europe's struggle with debt:
http://r.reuters.com/hyb65p
Insider interview with WestLB's Leister:
http://reut.rs/kwRVlV
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AUTOS SKID, CHARTS BEARISH
Automobile shares featured among the biggest losers, with the Stoxx Europe 600 sector index <.SXAP> falling 2.9 percent, on concerns about global demand for vehicles on disappointing macroeconomic data.
Figures for the second quarter showed marginally slower economic growth in the euro zone and China, while Chicago Fed national economic activity index fell in April. [ID:nLDE74M0Z1]
The Euro STOXX 50 index <.STOXX50E> fell 2.1 percent to 2,794.26 points. According to chart analysts the index has a strong support at 2,710, which, if cleared, will put a large head and shoulders pattern into play, with the measuring targets at 2,560 and 2,450.
"As the index is underperforming other major European and American peers, there is a strong chance of such a deep correction. We are bearish equities till the middle of June," said Dmytro Bondar, technical analyst at RBS.
"However, to be on the safe side, one can wait for more confirming signals, such as a sustained break of the neckline."
However, Peter Braendle, European equities specialist at Swisscanto Asset Management, which manages 60 billion Swiss francs ($67.94 billion), said valuations were still non-demanding and he was fairly positive regarding European equities in the longer term.
"We are not defensively-positioned as we are confident about the longer term. We like software, capital goods and media sectors, but are bearish on utilities and food and beverages."
Nomura raised its recommended exposure to European oils and reduced its exposure to basic industries saying demand patterns for key non-oil commodities had become more sensitive.
The Stoxx Europe 600 banking sector index <.SX7P> fell 2
percent. France's Credit Agricole
The airline sector also came under pressure following an
eruption by Iceland's most active volcano. Air France