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* STOXX Europe 600 down 0.1 percent
* Monte dei Paschi swings after initially failing to open
* Actelion surges to record on J&J talks
* M&A stories help Inchcape, Ontex
By Alistair Smout
LONDON, Dec 22 (Reuters) - European shares edged lower on Thursday, dropping further from their highest levels of the year, though Italian blue-chips outperformed as they shrugged off uncertainty over Monte Paschi's rescue plan.
Drugmaker Actelion provided support as it surged to a new record high after it entered exclusive discussions with prospective bidder Johnson & Johnson.
The STOXX 600 was down 0.2 percent, falling for a second straight session after hitting its highest level since Jan. 4 on Tuesday.
Outside the STOXX 600, shares in Banca Monte dei Paschi chopped in and out of negative territory after initially failing to open, and was last down 1.1 percent. It failed to find an anchor investor for its private rescue plan on Wednesday, and looks set for a state bailout.
However, Italy's blue-chip FTSE MIB rose 0.5 percent, and Italian banks rose 0.8 percent, outperforming other European shares.
Analysts said that other Italian banks such as Intesa Sanpaolo and UniCredit had better capital positions, and were taking steps to improve their situations further.
"(Investors) are looking at Monte dei Paschi and saying it's an individual case ... I think people would not read across to Intesa or UniCredit," said Edmund Shing, global head of equity & derivative strategy at BNP Paribas.
"Those two look to be on a much sounder footing, and really look to be largely unaffected by Monte dei Paschi ... That's why the Italian banking sector has reacted quite differently to Monte dei Paschi."
Miners were the biggest sectoral fallers, down 1.1 percent as copper hit a 1-month low. The sector remains up 59 percent for the year, however.
The STOXX 600 is up 5.4 percent in December, and set for its biggest monthly rise rise since October 2015.
One of the month's big winners has been Actelion, up 15 percent in December after a 37 percent surge in November, as possible buyers circle the stock.
Actelion rose as much as 8.2 percent to hit a record high on Thursday. The Swiss biotech company has turned back to potential acquirer Johnson & Johnson for exclusive talks about a "strategic transaction", in an about-turn that appears to sideline rival suitor Sanofi.
Sanofi rose 1.7 percent.
M&A stories supported other stocks, with Ontex rising 5.2 percent after confirming discussions of a possibly acquisition of Hypermarcas in Brazil, while Inchcape jumped 5.1 percent after buying a distribution business in South America.
Nokia was the top faller on the index, down 4.3 percent after it said it had filed a number of lawsuits against Apple for violating technology patents. (Editing by Alison Williams)