(Reuters) - European shares fell in a choppy afternoon session on Thursday, erasing earlier strong gains, with traders saying the market came under pressure after European Central Bank President Mario Draghi cautioned on the region's economic outlook.

Draghi said at a news conference after the ECB cut rates by a quarter of a point that intensified financial market tensions were continuing to dampen economic activity in the euro area and the outlook remained subject to high uncertainty and substantial downside risks.

At 1440 GMT, the FTSEurofirst 300 index of leading European shares was down 0.4 percent at 985.00 points after trading in a wide range of 980.63-998.75 points and moving in and out of positive territory several times during the day.

Sectors linked to economic growth were among the worst performers, with automobile shares down 2.4 percent and construction and materials down 1.7 percent. Banks fell 0.9 percent.

The ECB has disappointed -- as talking down the likelihood of growth in the euro zone offsets any benefit that we may see from the European Central Bank, said Manoj Ladwa, senior trader at ETX Capital.

The EU summit could now disappoint, it is going to be difficult to get the 17 nations to agree on something and with growth anaemic at best in 2012, there is more downside to come.

Investors were cautious ahead of the crucial EU crisis summit this week that is expected to agree on bold measures to resolve the euro zone debt crisis. Analysts said the market could gain around 5 percent on such an outcome from the summit.

Yet deteriorating macroeconomic conditions in Europe and their impact on company earnings may weigh on equities in the new year, unless European policymakers take urgent measures to boost confidence and bring the region's economic recovery back on track, they added.

France and Germany sought to lobby for their plan to amend the European Union treaty to toughen budget discipline, which they want to have ready by March.

Not all euro zone countries are comfortable with all the French and German proposals, with Finland opposed to their call for majority votes on major policy decisions.

Citigroup said the summit was unlikely to solve the crisis by itself, but may be a part of the solution. There is ample scope for re-widening as the market gets ahead of itself and as each bubble of optimism is pricked by reality.