European shares fell on Thursday after a profit warning from retail heavyweight Tesco and weak U.S. retail and labour data more than offset relief from successful Spanish and Italian debt auctions.

The FTSEurofirst 300 <.FTEU3> index of top European shares fell 0.3 percent to a provisional close of 1,018.75 points after hitting a five-month high of 1,031.08.

Tesco fell 16.2 percent after issuing its first profit warning in living memory, on fears the world's third-biggest retailer would launch a price war to fight back from its worst Christmas in decades.

The European retail index <.SXRP> was the top decliner, down 5.7 percent.

When companies that have previously been at the top of their game start to disappoint, investors run scared for a while. The issue is whether this is destabilising for the sector as a whole, said Richard Jeffrey, chief investment officer at Cazenove Capital Management.

Adding to the gloom, U.S. retail sales rose at the weakest pace in seven months in December and first-time claims for jobless benefits moved higher last week, signs the economic recovery remains shaky despite a pick-up in growth.

(Reporting by Brian Gorman)