* FTSEurofirst 300 down 0.1 pct, Euro STOXX 50 down 0.5 pct
* FTSEurofirst retraces after flirting with 16-month high
* Bullish triangle pattern shapes up on Euro STOXX chart
* Volumes remain anaemic as many 'hurdles' seen this week
By Blaise Robinson
PARIS, Nov 7 (Reuters) - European stocks gave up their gains on Wednesday, with indexes retreating from major resistance levels as nagging euro zone worries eclipsed early relief at U.S. President Obama's re-election.
The European Commission said on Wednesday the euro zone economy will barely grow next year, with Spain's economy expected to contract 1.4 percent both this year and next year, much worse than the government's prediction.
"It's been those revised euro growth forecasts, general cuts in expectations for growth. That has provided the catalyst - or excuse if you like - for people to cut back a bit, but we would've expected some weakness after last night's run higher anyway," a London-based trader said.
At 1249 GMT, the FTSEurofirst 300 index of top European shares was down 0.1 percent at 1,113.82 points, after surging to less than a point below a high hit in mid-September above which the index would be at a 16-month high.
Trading volumes were extremely thin, however, with only 40 percent of a 90-day daily average volume with 3 1/2 hours to go in the session.
Stocks had strongly rallied in morning trade, as U.S. President Barack Obama's re-election fuelled hopes the Federal Reserve's loose monetary policy will continue.
"Investors are reassured by Obama's victory. It removes uncertainty, and markets hate uncertainty," Saxo Banque senior sales trader Alexandre Baradez said.
"But that's just one hurdle in a very busy week: we have a delicate political transition in China, a key bond auction in Spain and an ECB meeting, so it's hard to see stocks moving further up in the short term even though we might break resistances."
Baradez says it will take a strong catalyst, such as a bailout request from Spain or a quick deal on the U.S. 'fiscal cliff' to help stocks break out of their recent trading range.
But Spain, which is set to sell up to 4.5 billion euros in bonds on Thursday, is in no rush to formally ask for a bailout.
And despite Obama's victory, the balance of power in the U.S. Congress is mostly unchanged, meaning another standoff in talks aimed at avoiding a fiscal breakdown is entirely possible.
If a deal is not reach, about $600 billion in spending cuts and tax hikes are set to be automatically triggered at the end of the year, which investors fear will derail the U.S. recovery.
French banking stocks were among the top gainers on Wednesday, helped by BNP Paribas's forecast-beating quarterly earnings, which sent its shares surging 4 percent.
Rivals Societe Generale and Credit Agricole , yet to report third-quarter results, were up 1.4 percent and 0.8 percent respectively.
"We still have a positive bias on stocks for the next few months, but in the short-term the cacophony in Europe could continue to make waves," said Barclays France director Franklin Pichard, who recommends buying financial stocks such as BNP Paribas, Societe Generale and AXA.
Around Europe, UK's FTSE 100 index was down 0.3 percent, Germany's DAX index down 0.4 percent, and France's CAC 40 down 0.5 percent.
The euro zone's Euro STOXX 50 index was down 0.5 percent at 2,523.99 points, retreating after hitting strong resistance just below the descending trendline formed by September and October highs.
The chart for the blue-chip index shows a bullish symmetric triangle pattern shaping up since mid-September, with the index trading in a tightening range, signalling that a break above the triangle could quickly send the index rallying to March levels.