Feb 8 (Reuters) - Finnish stainless steelmaker Outokumpu said on Thursday its core earnings fell less than expected in the fourth quarter, and that it sees the recovery in its European business continuing after it hit a low point in the third quarter.

Weakness in European steel markets and low prices have weighed on steelmakers' profits over the past year after they hit record levels in 2021 and 2022.

"The European market clearly declined in the second quarter, and the third quarter was the lowest point for business area Europe. Since then, market recovery has been slow," CEO Heikki Malinen said in a statement.

He added the group has taken "prompt, preventative measures" to restore its profitability. The company said a slow recovery is expected to continue in Europe.

Its shares were up 3.6% at 0816 GMT.

The company posted a 34.5% drop in October to December adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) to 72 million euros ($77.6 million), beating analysts' expectations in a company-provided poll of 55.3 million.

Its operating loss in the same period was however larger than expected at 314 million euros, negatively impacted by a 264 million euro impairment related to a renegotiated agreement in the Americas business area.

Sluggish growth in Europe has led the Finnish group to eye investment opportunities in the U.S., where it was planning to expand production with a new hot-rolling mill before eventually prolonging a deal to procure hot-rolling services from ArcelorMittal Nippon Steel.

Outokumpu's stainless steel deliveries stayed at the same level in the fourth quarter, but are expected to rise 5-15% in the first quarter of this year.

Its adjusted EBITDA is expected to be at a similar level in the first quarter compared to the fourth.

Swedish rival SSAB kicked off European steelmakers' quarterly reporting season last month with a smaller than expected drop in operating profit.

Outokumpu proposed a dividend of 0.26 euros per share for 2023, down from 0.35 euros per share distributed last year.

($1 = 0.9276 euros) (Reporting by Jagoda Darlak and Elsa Ohlen in Gdansk; Editing by Milla Nissi, Jason Neely and Jan Harvey)