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European shares steady, buoyed by bank rally; Spain outperforms

(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) Updates prices, adds details)

* Pan-European STOXX index ends flat, down 5.9 pct in 2016

* Banks erase post-Brexit losses after five days of gains

* Syngenta (LSE: 0QOP.L - news) , Aixtron drop as Chinese deals hit roadblocks

* Spain outperforms as political deadlock seen ending

By Danilo Masoni and Alistair Smout

MILAN/LONDON, Oct (HKSE: 3366-OL.HK - news) 24 (Reuters) - European shares ended flat on Monday with continued gains in banks offset by weakness among pharma stocks, while Spain outperformed on signs of an end to a political deadlock.

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The pan-European STOXX 600 index ended flat at 344.26 points. The index is down 5.9 percent so far this year.

The STOXX 600 Bank index rose 1.4 percent, making gains for the fifth session in a row and erasing all of its losses since Britain voted to leave the European Union in June.

Sentiment in the sector was brightened by an upbeat note from JP Morgan strategists that recommended investors buy into banks on prospects of rising global yields.

"Euro banks keep facing profitability pressures, but we believe that banks remain a good place to hedge out the risk of rising bond yields and rising inflation," they said in a note.

Spanish banks were among the strongest. Spain's IBEX rose 1.3 percent, hitting a six-month high as the country looked set end a 10-month long political deadlock.

Spain's leader Mariano Rajoy is on track to secure a second term in power for his People's Party after his Socialist rivals agreed to abstain in a looming confidence vote on Sunday.

Elsewhere in the sector, Monte dei Paschi (Milan: BMPS.MI - news) soared 28 percent as the Italian bank was set to unveil a capital-boosting and new business plan on Monday.

The STOXX 600 healthcare index fell 0.7 percent. Actelion (LSE: 0QMN.L - news) , down 3 percent, was the biggest faller among drugmakers after brokers cut their price targets, while heavyweights AstraZeneca (NYSE: AZN - news) and Roche fell 2 percent and 0.7 percent respectively.

Syngenta fell 5.8 percent after the European Union said that ChemChina had missed a deadline to offer concessions to regulators regarding its $43 billion bid for the Swiss pesticides and seeds group.

Baader Bank (Xetra: 508810 - news) said while the share price reaction was understandable, it still expected the deal to be closed even though it could suffer a delay into the first half of next year.

In another example of the scrutiny that such acquisitions are under from regulators, the German government withdrew its approval for a Chinese takeover of chip equipment maker Aixtron , throwing up an unexpected hurdle for a 670-million-euro deal on the home stretch.

Shares (Berlin: DI6.BE - news) in Aixtron fell 13 percent.

Media firms came in focus after AT&T (Sao Paolo: ATTB34.SA - news) agreed to buy Time Warner (Xetra: AOL1.DE - news) for $85.4 billion over the weekend.

Shares in ITV (Frankfurt: A0BLQP - news) and Sky (Frankfurt: 893517 - news) rose as much as 2.8 and 2.4 percent respectively, buoyed by the AT&T takeover news before paring gains.

Zodiac Aerospace (LSE: 0NR6.L - news) rose 1.3 percent after U.S. peer Rockwell struck a deal to buy B/E Aerospace, while French Connection (LSE: FCCN.L - news) rose 14 percent after a newspaper report that there was interest from the United States in a takeover of the UK fashion firm.

Top individual riser on the STOXX 600 was Philips (Amsterdam: PHIA.AS - news) , up 4.4 percent after its results.

Among the big fallers, aerospace and defence firm Cobham (Amsterdam: CH6.AS - news) fell 13 percent after it issued its second profit warning in six months. (Reporting by Danilo Masoni and Alistair Smout; Editing by Tom Heneghan)