* STOXX 600 down 1 percent

* Most European markets in negative territory

* Euro at two-year high weighs on earnings

* Paysafe surges on 2.86 billion-pound bid (ADVISORY- Follow European and UK stock markets in real time on the Reuters Live Markets blog on Eikon - see cpurl://apps.cp./cms/?pageId=livemarkets)

By Julien Ponthus and Helen Reid

LONDON, July 21 (Reuters) - European shares sank on Friday as the euro strengthened company earnings disappointed at the end of a turbulent week.

The euro climbed to a two-year high on Friday, sending the exporter-heavy STOXX 600 down 1 percent to a weekly decline of 1.7 percent. Euro zone stocks fell 1.3 percent while blue chips sank 1.4 percent.

The weekly loss came after the STOXX 600 had its strongest week in more than two months, indicating a sharp turnaround in sentiment.

"While earnings seasons over the past year have typically started strong before turning worse, the current season is off to a decidedly weak start", Deutsche Bank's equity strategist Wolf von Rotberg, said.

"FX strength is set to weigh on euro earners’ results, which will likely contribute to subdued beat ratios for the remainder of the season", he said.

However, money kept flowing into European equities, with the largest inflows to the region in 10 weeks, some $3 billion . Investors pointed to inflows as mitigating muted second-quarter earnings growth.

"Since the start of 2016, $60 billion left European equities, and $20 billion has flowed back in. So there's still that remaining $40 billion which hasn't yet come back in, which provides the technical support for our positive view," said Nandini Ramakrishnan, global market strategist at JP Morgan Asset Management.

She added she saw second-quarter earnings growth for the STOXX 600 in the high single digits and hitting 14 percent for the full year.

France's blue-chip CAC 40 fell to its lowest since April 21, just before Emmanuel Macron's first-round victory sent French and European equities surging.

Germany's DAX fell 1.7 percent, its worst daily performance in a month and its lowest since April as well.

Deutsche Bank strategists have an underweight on the French and German markets because of their heavy cyclicals weighting, which they think could hurt them as momentum in PMI indicators fades. They are favourable on the more defensive Swiss and UK indexes.

Infineon led the DAX down, falling 5 percent after Exane analysts cut the stock to "underperform".

"While Infineon has been preparing for GaN/SiC (gallium nitride/silicon carbide) migration, competitors are also joining the race. We see more threats than opportunities for Infineon," they said.

Auto stocks fell the most,, sinking 2.8 percent, in their worst day in six months, after French car parts maker Valeo posted disappointing results and fell 7 percent to the bottom of the CAC 40.

Deal-making triggered some of the rare gains. Payments firm Paysafe surged 6.8 percent after a bid from Blackstone and CVC Capital Partners.

Philips Lighting, the world's largest lighting company, fell 7.7 percent after analysts pointed to weaker free cash flow and pricing pressure in its second-quarter results .

(Writing by Julien Ponthus and Helen Reid; Editing by Kevin Liffey and Alexander Smith)