* FTSEurofirst 300 down 1.4 percent
* Cyclical banks, commodities bear brunt of sell-off
* Euro STOXX implied vol index up sharply
By Tricia Wright
LONDON, Nov 7 (Reuters) - European stocks fell sharply on Wednesday after bleak forecasts for the euro zone economy and fiscal problems in the United States eclipsed initial relief over U.S. President Barack Obama's re-election.
In morning trade the FTSEurofirst 300 had hit a level not seen for nearly two months as the Obama win fuelled hopes the U.S. Federal Reserve would maintain its loose monetary policy.
But the European Commission's forecast that the euro zone economy would barely grow next year kick-started a long slide into the close for European indexes.
And while investors were relieved over Obama's victory, they remained concerned about the U.S. "fiscal cliff" of about $600 billion in spending cuts and tax hikes set to begin early 2013, which could jeopardise growth.
"The fact that the election had gone swimmingly, there were no glitches, it was a clear winner, had helped markets open higher," Angus Campbell, head of market analysis at Capital Spreads, said.
"Then you get the downgrades to GDP (gross domestic product) for the euro zone and then you get the U.S. markets opening ... that turned the focus onto the fiscal cliff and suddenly you get this huge sell-off."
The FTSEurofirst 300 closed down 1.4 percent at 1,099.35, while on Wall Street all three major indexes were off more than 2 percent.
No sector was spared the sell-off. European stocks geared to the economic cycle gave most ground, with miners, energy stocks and banks all off 2 percent.
French bank BNP Paribas managed to buck the weak trend seen amongst its peers, adding 1.1 percent, buoyed by forecast-beating quarterly earnings.
"It's natural that people are going to start to knee-jerk their way into the market and position for the next month now that we've got this one hurdle (the election) out of the way," Joshua Raymond, a strategist City Index, said.
In the post-election burst higher, the FTSEurofirst 300 threatened to pierce the top end of a 40-point trading range dating back to Sept. 14.
The close of trade took it back near the middle of that range, having swung through its biggest one-day points range since Sept. 6, when the European Central Bank announced its bond-buying plan.
The Euro STOXX 50 implied volatility index, meanwhile, jumped 6.9 percent. The index, which measures the cost of protecting stock holdings against potential pull-backs, is seen as a crude barometer of aversion to taking on risk and normally moves in the opposite direction to equities.
Despite Obama's win, the balance of power in the U.S. Congress is mostly unchanged, meaning another standoff in talks aimed at avoiding a fiscal breakdown is entirely possible.
The unresolved problems facing Greece gave investors further cause for concern. The parliament is meant to vote later on Wednesday on further austerity needed to secure a fresh injection of euro zone and IMF aid and avert bankruptcy.