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* STOXX 600 up for third straight session
* Thyssenkrupp and ArcelorMittal among top performers
* Goldman Sachs keeps "neutral" view on equities
By Sudip Kar-Gupta
LONDON, July 11 (Reuters) - A rally in the shares of steelmakers and financials helped European stocks to rise for the third straight session on Monday, with the steel companies lifted by signs of sector consolidation.
The pan-European STOXX 600 index gained 0.5 percent. It is down about 10 percent so far in 2016, having lost ground in the immediate aftermath of Britain's shock vote last month to leave the European Union, although it has recovered from the lows reached after the June "Brexit" vote.
ThyssenKrupp, Germany's biggest steelmaker, said it was in talks with India's Tata Steel about a consolidation of beleaguered European steel mills that are hit by overcapacity, weak demand and cheap imports.
The prospect of sector consolidation pushed up Thyssenkrupp shares by 5 percent, while rival ArcelorMittal also climbed 4.7 percent.
Shares in Italian bank Monte Paschi also rose 5 percent, with Italian newspapers reporting that bank rescue fund Atlante will soon take on an additional role to soak up bad loans from Monte Paschi.
Italy's banking sector has been hit by concerns over non-performing loans, but some investors said aid for the European banking sector from the European Central Bank (ECB) would prevent bank stocks from losing too much ground.
"I'm still 'long' on the market and I bought up a position on the euro zone bank index," said Clairinvest fund manager Ion-Marc Valahu.
"There are problems with non-performing loans for sure, but we're not looking at a 2007/2008 banking crisis. The banks still have access to liquidity and the tools of the ECB," added Valahu.
Nevertheless, Goldman Sachs' strategists kept a "neutral" view on equities, given concerns over a generally weak economic backdrop, with the Brexit vote expected to hit the British economy.
"We remain defensive in our asset allocation and believe the positioning-driven recovery of risky assets, in particular for equities, post Brexit is likely to fade," said Goldman.
"We still believe equities are fragile and stuck in their 'fat and flat' range with little return potential but potential for drawdowns," it added. (Editing by Keith Weir)