Weaker utilities take shine off European equities

(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)

* STOXX 600 index closes off intra-day highs

* Utilities among sharp losers, banks gain

* Precious metals miners track weaker gold

By Danilo Masoni and Atul Prakash

MILAN, Nov 14 (Reuters) - European shares surrendered most of their early gains and ended slightly higher on Monday, with a slump in bond-proxy sectors following a rally in bond yields capping gains recorded by financials and miners.

The pan-European STOXX 600 index closed 0.2 percent higher at 338.23 points, off its intra-day high of 341.98 points. The index rose 2.6 percent last week, boosted by the surprise win of Donald Trump in the U.S. presidential election, which fuelled hopes of a huge fiscal stimulus in the country.

The market reaction further bolstered expectations of a U.S. rate hike, prompting investors to favour cyclical stocks such as banks over defensive plays like utilities and real estate.

Bets that a pick-up in inflation was finally around the corner sparked a sell-off in bonds as well as so-called "bond proxies" - or traditional dividend-paying sectors - in equities.

"European stocks started the day in positive spirits. As the day pushed on, the bullish spirit waned," said Jasper Lawler, analyst at CMC Markets (LSE: CMCX.L - news) , adding that investors were fretting over the implications of a sharp slide in bond prices.

European utilities hit a three-year low before closing 2 percent lower, the worst sector performers, while the telecoms sector fell 0.5 percent. Energy, consumer staples and real estate shares all fell, having opened higher.

Precious metals miners Centamin (Frankfurt: A1JPZ6 - news) , Randgold and Fresnillo (Frankfurt: A0MVZE - news) dropped 2.1 to 3.8 percent as gold prices hit their lowest in more than five months on a firmer dollar following expectations of a U.S. rate hike in December.

The banking index rose 2.1 percent, the biggest sectoral gainer, amid a series of reports about possible merger activity in a sector whose margins have been squeezed by sluggish growth and ultra-low interest rates.

Commerzbank (Xetra: CBK100 - news) rose 6.6 percent after Handelsblatt reported that the German bank, private equity firm Apollo and a consortium of Towerbrook and Acathia were interested in buying Oldenburgische Landesbank (Frankfurt: 808600 - news) from Allianz (Hanover: ALVN.HA - news) .

Italy's UniCredit (EUREX: DE000A163206.EX - news) earlier rose more than 5 percent after an Italian news agency reported the rumour of a tie-up with Societe Generale (Swiss: 519928.SW - news) . The shares surrendered gains after UniCredit denied the rumour.

Swedish debt collector Intrum Justitia (LSE: 0H9P.L - news) closed 7.8 percent higher, the top gainer in the STOXX 600 index, after hitting a fresh record high. The company said it would merge with Norway-based Lindorff. (Reporting by Danilo Masoni; Editing by Andrew Roche)