(For a live blog on European stocks, type LIVE/ in an Eikon news window)
* WTO approves $7.5 bln U.S. tariffs on EU goods
* STOXX 600 gives up most of its Sept gains
* FTSE 100 leads declines across major regions
* Europe Q3 earnings could be worst in 3 years (Adds details on WTO tariff decision, UK Brexit proposal; updates prices to close)
By Susan Mathew
Oct 2 (Reuters) - European stock markets dived almost 3% to log their worst day since last December on Wednesday as the threat of a transatlantic trade war and dismal economic data added to fears about a faltering global economy.
Losses in London were the most dramatic, with the FTSE 100 seeing its worst session in 3-1/2 years after Prime Minister Boris Johnson unveiled a final Brexit proposal that dimmed the chances of Britain leaving the European Union with a deal.
In Europe, Airbus dropped 2% and the benchmark STOXX 600 index gave up almost all of the past month's gains after the World Trade Organization approved U.S. moves to slap import tariffs on $7.5 billion worth of European goods.
Global equity markets are already reeling from a prolonged tit-for-tat battle between Washington and Beijing over trade, which has showed up this week in sharp falls in manufacturing sector indicators on both sides of the Atlantic.
"We haven't seen the worst of the trade war impact yet and of course it's a big impact on (manufacturing in) Europe because it relies so much more on exports than U.S.," said Andrea Cicione, head of strategy at TS Lombard.
The losses drove the pan-European index below its 100-day moving average, seen as a strong technical support level that could spur further losses.
All of Europe's major markets tumbled more than 2%, with Italian shares losing 2.9% in their worst session since December, while French stocks gave up a full 3%.
Frankfurt shares fell 2.8% to their lowest level in a month and have now fallen more than 4% in just two days.
Latest Refinitiv data showed European companies could be set for their worst quarterly earnings period in three years as revenue drops for the first time since early 2018.
"It's going to be a tough season and the most important thing will be how the companies view going into Q4 and the early outlook for 2020, which is shaping up to be a tough year for markets and corporates," said Neil Campling, analyst at Mirabaud Securities.
All eyes are now on the release of service sector data from the euro zone on Thursday.
Among the worst performers was French waste and water group Suez which dropped 7% after its new chief executive unveiled a four-year plan to boost earnings but failed to provide clarity on dividends and planned asset sales.
Flutter Entertainment was one of the few gainers on the tumultuous day, up 7% after the company agreed to merge in an all-share deal with Stars Group Inc (TSG), owner of Poker Stars.
Among sectors, oil stocks were the biggest drag on the pan-regional index as prices of Brent crude sank 2.5%.
Additional reporting by Shreyashi Sanyal and Sruthi Shankar in Bengaluru; editing by Bernard Orr, Patrick Graham and Giles Elgood