* FTSEurofirst 300 dips, but set for best month since late 2011
* 'Europe on the verge of an upgrade cycle' -Morgan Stanley
* Greek shares recover, ATG index still down 12 pct on week
By Blaise Robinson
PARIS, Jan 30 (Reuters) - European stocks dipped on Friday, with Banca Monte dei Paschi di Siena skidding 6.5 percent after sources said a planned capital increase at the lender might be bigger than expected.
The troubled Italian bank is considering raising the size of its capital hike to around 3.5 billion euros ($4 billion), one billion euros more than initially planned, the sources said.
At 1207 GMT, the FTSEurofirst 300 index of top European shares was down 0.2 percent at 1,470.40 points. However, it was up 7.4 percent since the start of January - on track to post its best monthly performance in three years and outpacing Wall Street where the S&P 500 was down 1.8 percent since the start of the year.
"It's a little pause ahead of the weekend, but there's no real selling pressure and technically, charts show that indexes are still in a bullish trend," Saxo Bank trader Andrea Tueni said.
"People are just cautious, with a couple of potential negative catalysts like Russia and Greece in mind, so it's tempting to book profits."
European stocks have recently been lifted by expectations that a bond-buying programme by the European Central Bank will help the region's economic recovery, while a weaker euro and lower oil prices are seen reviving corporate profits.
Morgan Stanley strategists upgraded their forecast for European earnings for the first time in three years, seeing an improvement in the region's economic momentum this year.
"After four years of persistent growth disappointment, we believe that Europe is on the verge of an upgrade cycle. This will be one of the dominant factors influencing investment returns in Europe this year," they said in a note.
"European net earnings revisions have been in negative territory since March 2011. Over the next 1-2 months we believe this series is likely to move into positive territory as analysts adjust their forecasts for the significant moves we've seen in FX, rates and the oil price."
Around Europe, Britain's FTSE 100 index was down 0.4 percent on Friday, Germany's DAX index was flat, and France's CAC 40 was down 0.2 percent.
Greek shares outperformed, recouping some of the losses suffered earlier in the week following the election victory of anti-bailout party Syriza and the new government's cancellation of privatisation plans.
The Athens Stock Exchange FTSE Banks Index was up 6.1 percent, with Bank of Piraeus up 8.8 percent and Alpha Bank up 8 percent.
The broader Athens ATG benchmark equity index was up 0.7 percent, rising for a second consecutive day, but was still down 12.2 percent on the week.
Today's European research round-up
Editing by Susan Fenton