* FTSEurofirst 300 closes down 1.3 percent
* Last day of trading in Germany, Italy, Spain
* Energy stocks hit by slide in oil price
By Simon Jessop
LONDON, Dec 30 (Reuters) - European shares closed lower on Thursday, paring some of December's strong gains on the last day of trading in countries including Germany, Spain and Italy, with China growth and euro zone debt concerns weighing on sentiment.
The FTSEurofirst 300 closed down 1.3 percent at 1,128.55 points, and while the fall is the largest one-day retreat this month, the benchmark index remains on track to record its biggest monthly gain since March.
Volumes were low, however, continuing the pattern of the last week, which meant it was hard to read too much into the decline, especially after the strength of the so-called "Santa rally" earlier in the month, said analysts.
"The volumes just aren't there," said Howard Wheeldon, strategist at BGC Capital Partners. "I'm hard placed to remember it ever being quite this bad."
After opening slightly higher, the index soon turned lower, with some citing as a bearish factor the overnight release of a private survey showing the pace of business expansion in China was moderating.
"We had a pretty decent Santa rally through the early and middle of December, and there's no doubt there's a bit of indigestion which is putting some pressure on the markets," added Henk Potts, strategist at Barclays Wealth.
The growth outlook for many developed market equities was increasingly linked to growth in China, so traders would watch data "far more closely, not only in 2011 but in the future" to see exactly how sustainable that growth will be, he added.
Ongoing euro zone peripheral debt concerns "continue to stare us in the face" and provided further support for Thursday's pullback, said Wheeldon. "There's a very fraught and very difficult year ahead," he added.
Earlier on Thursday, the latest Italian bond auction met with only partial success after it failed to sell part of its planned offering and was forced to pay higher yields.
The increased investor caution was also seen in the VDAX-NEW volatility index, which rose 6.8 percent to a three-week high. The higher the reading, which weighs puts against calls on the top 30 Frankfurt stocks, the more risk averse investors are.
The strength of the European pullback was such that even more positive U.S. macroeconomic data had little impact. Earlier, weekly jobless claims fell to a more than two year low, while a business sentiment index rose strongly.
OILS
A 1.9 percent slide in benchmark U.S. crude, on the back of rising U.S. oil and product stocks, underpinned a 1.3 percent fall in the STOXX Europe 600 oil and gas index index, with Total and Statoil down around 1 percent. Among individual stocks, Norway's Yara International ended up 0.9 percent, bucking a largely weaker STOXX 600 Chemicals index, after traders said cold weather had spurred demand for salt to fight slippery road conditions.
Across Europe, Britain's FTSE 100, Germany's DAX and France's CAC 40 fell 0.4 to 1.2 percent. (Editing by Jon Loades-Carter)