European shares fall as weaker commodity, bank stocks offset merger talk

* STOXX down 0.9 pct, Italy's FTSE MIB down 2 pct

* UniCredit (EUREX: DE000A163206.EX - news) leads banks lower as cash call nears

* But M&A talk lifts Vodafone, Atkins WS

* Oils lead sectoral fallers on weaker crude prices (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) Adds details, updates prices)

By Danilo Masoni

MILAN, Jan 30 (Reuters) - European shares fell on Monday, weighed down by losses among commodities-related stocks and banks, though speculation about merger and acquisition activity offered some support with Vodafone among the leading gainers.

Vodafone rose 3 percent after the British phone group said it was in talks to merge its Indian unit with Idea in an all-share deal that could help counter fierce competition.

"Something had to be done and this merger might be the way to strengthen Vodafone's hand in the Indian price war," said ETX Capital (Other OTC: CGHC - news) analyst Neil Wilson in a note.

Gains in Vodafone made Europe's telecoms index the only one to trade in positive territory.

The STOXX 600 fell 0.9 percent, with the mood among investors dampened after U.S President Donald Trump introduced a travel ban, increasing concerns about the impact of his policies on global trade and the economy.

But despite those losses the pan-European index is still up 0.4 percent so far in January and set for its third straight month of gains.

The surge seen in recent weeks has reflected optimism over Trump's plans to boost the economy with tax cuts and deregulation, as well as a good start to the earnings season and growing merger speculation.

On Monday M&A talk lifted shares in British engineering firm Atkins WS, which jumped 4.8 percent on a report of a $4 billion merger approach from U.S. company CH2M.

But the M&A talk was more than offset by weakness among oil and gas and mining stocks, the biggest sectoral laggards, after crude prices fell and copper eased below eight-week peaks. (MET/L]

Oil majors BP, Total (LSE: 524773.L - news) and Royal Dutch Shell (LSE: 0LN9.L - news) were down between 1 and 1.5 percent, while oil products storage company Vopak and refiner Neste (EUREX: 2114019.EX - news) were both hit by a Goldman Sachs (NYSE: GS-PB - news) downgrade to sell.

But an upgrade to buy from UBS (LSE: 0QNR.L - news) lifted shares in Germany's Software (IOB: 0NJS.IL - news) , which surged 6.1 percent to top gainers on the STOXX.

Banks were led lower by a 5 percent drop in UniCredit. Italy's biggest bank said its end-2016 capital ratios would not meet requirements set by the European Central Bank as it prepares to launch a 13-billion euro rights issue to boost its financial strength.

UniCredit dragged FTSE down more than 2 percent, making the Italian blue chip index the biggest faller among major national indexes in Europe. The Italian banking index fell more than 3 percent to a six-week low. (Reporting by Danilo Masoni; Editing by Gareth Jones)