European shares set for biggest monthly loss in a year

* STOXX down over 2 percent in June

* Worries over tightening monetary conditions weigh

* Bayer (IOB: 0P6S.IL - news) drops after profit warning

* Italy's Unipol (Dusseldorf: 18319160.DU - news) gains (Adds details, prices)

By Danilo Masoni

MILAN, June 30 (Reuters) - European shares were choppy on Friday and were set to end June with their biggest monthly loss in a year as worries over tightening monetary conditions soured the mood.

The pan-European STOXX 600 index was up 0.2 percent at 0805 GMT and euro zone blue chips also inched higher, both recovering from earlier losses, while the UK's FTSE 100 fell 0.3 percent.

The STOXX is down more than 2 percent in June, following four straight months of gains due to easing political worries in the euro zone and brightening economic prospects.

But hawkish remarks from central bankers this week that boosted bond yields and the euro sparked a broad sell-off, with stocks that benefit from lower rates and export-oriented companies particularly under pressure.

Sectoral moves, however, were muted on Friday. While banks , which instead benefit from higher rates, rose for the fifth day in a row, up 0.1 percent, tech rebounded, up 1.1 percent to lead sectoral gainers.

In an otherwise thin day for big company news, Bayer (Swiss: BAYN-EUR.SW - news) was an exception.

Its shares suddenly fell as much as 5.4 percent after the German drugmaker warned it would have to adjust its full-year outlook, citing excessively high inventory levels at crop protection customers in Brazil and a weaker-than-expected consumer health business.

Bayer said it would adjust its business outlook when it publishes second quarter results on July 7.

Its shares weighed on Europe's chemical index which fell 1.1 percent, leading sector losers.

Unipol rose 3.8 percent after the Italian financial group said it would shift 3 billion euros of bad loans from its banking unit to a special vehicle as part of broader plans for an overhaul.

Under the reorganisation, Unipol will sell stakes in insurance companies to its insurance arm Unipol SAI.

"We believe that the price of the sale of the insurance stakes to UnipolSai (Amsterdam: UQ8.AS - news) is fair. The other measures announced aim to create the condition to finalize the merger between Unipol and UnipolSai," Banca Akros analyst Enrico Esposti said.

Among top fallers on the STOXX was UK pub retailer Greene King, down 3.7 percent, following a downgrade to neutral from JP Morgan, while oilfield services firm Subsea 7 (LSE: 0OGK.L - news) added 2 percent after an acquisition. (Editing by Ed Osmond)