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* STOXX 600 down 0.4 pct
* Oil index biggest sectoral gainer
* Lonza leads pharma stocks lower
* Italy outperforms as banks surge
By Danilo Masoni
MILAN, Dec 12 European shares fell on Monday
after a rally last week, as weaker drug makers more than offset
gains by oil stocks to near 17-month highs.
Shares in Swiss pharmaceutical company Lonza fell
6.9 percent after it said it was in advanced talks to buy U.S.
drugs capsule maker Capsugel. Sources earlier told Reuters the
deal could be worth more than $5 billion.
Baader Bank analyst Laura Lopez Pineda said the deal made
strategic sense, but worries about a potential capital increase
to finance it may weigh on the shares.
Lonza's decline was the biggest in Europe and helped to drag
Europe's STOXX Healthcare index down 1 percent.
Among top losers was precious metal miner Polymetal
. It fell 4.6 percent as gold prices were dragged down
by expectations that a possible U.S. rate hike this week would
curb demand for the safe-haven asset.
The STOXX Europe 600 fell 0.4 percent after hitting
its highest level in around 11 months in the previous session.
The index remains down more than 3 percent so far this year.
But losses in the broader market were limited by a rally in
crude oil. Crude prices climbed to their highest since mid-2015
after the Organisation of Petroleum Exporting Countries and
non-OPEC producers reached their first deal since 2001 to
jointly reduce output.
"Make no mistake about it - this historic agreement is a
game changer," FOREX.com analyst Fawad Razaqzada said. "Although
the crude oil rally has already started at the end of last month
when the OPEC first announced the deal, I think there is plenty
of fuel left in this rally."
The STOXX Oil & Gas index surged more than 2 percent
to its highest level since July 2015. Oil stocks such as Tullow
Oil, Petrofac and Eni were among the
top STOXX gainers, rising 3.5 to 9.4 percent.
Italy's FTSE MIB rose 1.1 percent, outperforming
the rest of Europe thanks to gains among its banks
and after Foreign Minister Paolo Gentiloni was tasked to form a
Monte dei Paschi rose more than 7 percent. The
ailing bank said it was pressing ahead with a plan to raise 5
billion euros on the market this year, despite political
UniCredit, the country's biggest bank, rose 3.5
percent after a deal to sell asset manager Pioneer to France's
Amundi for 3.5 billion euros. Amundi shares rose over
4 percent to a record high.
(Reporting by Danilo Masoni, editing by Larry King)