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* 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, 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, Randgold and Fresnillo 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 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 from Allianz.
Italy's UniCredit earlier rose more than 5 percent after an Italian news agency reported the rumour of a tie-up with Societe Generale. The shares surrendered gains after UniCredit denied the rumour.
Swedish debt collector Intrum Justitia 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)