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* Pan-European index STOXX 600 down 0.7 percent
* Italy's Monte Paschi hits new record low after ECB request
* Miners rise as China stimulus hopes lift copper prices
By Danilo Masoni
MILAN, July 4 (Reuters) - European shares ended a four-day winning streak on Monday with battered banking sector stocks offsetting gains among mining stocks bosted by higher metals prices.
Monte dei Paschi fell more than 10 percent to a fresh record low as a European Central Bank request to sell bad loans raised worries the Italian lender may have to raise capital quickly.
The pan-European STOXX 600 index was 0.7 percent down by 1319 GMT, after gaining 7.6 percent in the past four sessions, and the FTSEurofirst 300 fell 0.6 percent.
Stocks rose last week as expectations the ECB would step in to support markets eased concerns over any fallout from Britain's decision last month to leave the European Union.
Both indexes, however, remain below levels reached before the shock UK vote, which triggered worries about the political and economic outlook for Europe, weighing particularly on peripheral countries like Italy and financial stocks.
Some investors expected caution to prevail in the near term ahead of the next ECB policy meeting on July 21 with strategist at JP Morgan Cazenove saying they did not expect the market recovery to last for much longer.
"Market internals are not encouraging, political uncertainty will linger and activity momentum is likely to take a hit," they said in a note.
Europe's STOXX 600 Bank index declined 1.3 percent, led lower by Italian lenders which fell after Italian Prime Minister Matteo Renzi's spokesman said the country had no plans of defying EU rules by pumping public money into its banks, denying a report in the Financial Times.
Monte dei Paschi di Siena fell as much as 10.7 percent to a record intraday low of 0.3416 euros after the ECB asked the bank to cut its bad loan exposure by 40 percent over three years.
"The market thinks they risk having to launch the umpteenth capital increase, and this time it's quite unlikely that any shareholder will be willing to stump up more cash," IG banking analyst Vincenzo Longo said
Europe's STOXX 600 Basic Resources index, which contains major mining stocks, was the biggest sectoral gainer, up 2 percent, as copper prices rose with the market climbing to a two-month high on expectations of stimulus measures in China.
Shares such as Rio Tinto, Anglo American and BHP Billiton were all up by 1.5 percent to 2.5 percent.
Shares of precious metals miners advanced to new highs, tracking gains in gold and silver prices, with Randgold Resources climbing to a record high and Fresnillo at its best level since late 2012. (Reporting by Danilo Masoni; additional reporting by Silvia Aloisi in Milan and Sudip Kar-Gupta in London)