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* Pan-European STOXX 600 index ends 0.7 pct lower
* 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 stocks offsetting gains among mining shares boosted by higher metals prices.
Monte dei Paschi hit a record low as a European Central Bank request that it sell bad loans raised worries the Italian lender may have to raise capital quickly. Italy's FTSE MIB, down 1.7 percent, underperformed the market.
The pan-European STOXX 600 index closed 0.7 percent lower after gaining 7.6 percent in the past four sessions. The FTSEurofirst 300 index fell 0.6 percent.
Stocks rose last week as expectations the ECB would step in to support markets eased concerns over Britain's decision last month to leave the European Union.
Both the indexes, however, remain below levels reached before the British 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 before the next ECB policy meeting on July 21, with strategists 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 1.6 percent, led lower by a 3.7 percent drop in Italian banks. They fell after Italian Prime Minister Matteo Renzi's spokesman said the country had no plans to defy EU rules by pumping public money into its banks, denying a report in the Financial Times .
Shares in Monte dei Paschi di Siena closed 14 percent lower as the ECB asked the bank to cut its bad loan exposure by 40 percent over three years. fell
"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.
On the positive side, Europe's STOXX 600 Basic Resources index, which contains major mining stocks, was the biggest sectoral gainer, up 1.5 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 0.5 percent to 1.3 percent.
Shares in 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. Their shares rose 7.7 percent and 4.4 percent respectively. (Additional reporting by Silvia Aloisi in Milan; Atul Prakash and Sudip Kar-Gupta in London; Editing by Janet Lawrence)