* STOXX 600 down 0.5 pct
* Investors ready for central banker pow-wow
* WPP sinks after forecast cut
* Umicore drops as Berenberg cuts rating
* K+S jumps on report of hedge fund interest (Adds closing prices)
By Helen Reid
LONDON, Aug 23 (Reuters) - Media stocks weighed on European markets on Wednesday, led lower by sharp declines in advertising giant WPP after it cut sales forecasts on weakening demand.
Investors were keeping a close eye on monetary policy, a day ahead of the start of a central bank symposium in Jackson Hole, although dovish comments by European Central Bank chief Mario Draghi had little market impact.
Markets also shrugged off a PMI survey showing euro zone manufacturing businesses had their best month of growth in six and a half years in August.
"The last couple of weeks everyone has been sitting on the fence; there hasn't been a big directional view and people are struggling to decide which way to get off," said Graham Secker, chief European equity strategist at Morgan Stanley.
The pan-European STOXX 600 index and euro zone blue-chips both dipped 0.5 percent.
WPP shares lost 10.9 percent after the world's largest advertising group cut its full-year sales outlook after a drop in demand caused it to miss first-half targets.
The agency has been among the worst-performing stocks in the media sector, which has declined 4.8 percent overall this year against a buoyant broader European market.
"Deteriorating trading conditions are a concern and ...we are minded to trim our full year profit before tax forecasts by 4 to 5 percent," said Roddy Davidson, media analyst at Shore Capital.
The sector index < .SXMP> fell 2.7 percent, with WPP's French peer Publicis down 3.2 percent.
Potash miner K+S was a bright spot, jumping more than 4 percent after a report in German business newsletter Platow Brief that hedge fund Elliott could be interested in the company.
Fiat Chrysler ended up 5.8 percent at an all-time high on continued speculation about potential tie-ups. One day after China's Great Wall Motor cooled down prospects of a possible deal with Fiat, Bloomberg reported that the Italian American automaker was considering options including a plan to spin off the upscale Maserati and Alfa Romeo brands.
Belgian chemicals group Umicore fell 2.5 percent after Berenberg cut the stock to "hold" on valuation concerns. It has gained around 19 percent year-to-date, outperforming the chemicals sector.
"Generating substantial upside to the current share price would require us to assume around 15 percent global pure electric vehicle sales penetration by 2025 (base case: 11 percent) or that Umicore captures over 60 percent of the global market for automotive grade NMC by 2025," Berenberg analysts wrote.
Earnings for the STOXX 600 were set to grow 15.3 percent in the second quarter year-on-year, Thomson Reuters data showed.
Nine of the 10 sectors were expected to see an improvement in earnings in what analysts have called a “good, but not great” earnings season after a record-breaking first quarter.
Energy stocks have seen the strongest earnings growth, at 47.8 percent, while pharmaceutical companies, whose high exposure to the U.S. has made the stronger euro a headache, saw the weakest earnings growth rate, at -3.4 percent.
Reporting by Helen Reid and Danilo Masoni; editing by Kit Rees /Jeremy Gaunt