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* STOXX Europe 600 falls 0.6 percent
* All sectors negative, bar commodities
* OPEC deal boosts oil sector
* TalkTalk, Elekta among top fallers
By Alistair Smout and Peter Hobson
LONDON, Dec 1 (Reuters) - European shares edged lower on Thursday in a broad-based sell-off, halting a two-day rally and retreating from the previous session's three-week highs, led lower by drops in TalkTalk and Elekta.
The STOXX 600 was down 0.6 percent by 0938 GMT, having climbed to its highest level since November 10 in the previous session.
Almost every sector was in negative territory. The exceptions were in the commodity space after oil-producing countries came to a deal to limit oil output.
The STOXX Europe 600 Oil and Gas index was up 1.1 percent, while the basic resources index was up 0.1 percent, the only two sectors in positive territory.
Some traders said that, after a strong November rally that lifted U.S. stocks to record highs, investors were pausing at the start of December, with a referendum in Italy and presidential election in Austria this weekend prompting caution.
Despite a strong rally in oil, Wall Street ended lower on Wednesday.
"We've has this massive rally in the U.S., but it's starting to turn weaker and I think the malaise is spreading across Europe," Chris Beauchamp, market analyst at IG, said, adding that the likelihood that the Italian government would lose Sunday's referendum was contributing to the subdued sentiment.
Top faller was TalkTalk, down 4.6 percent, after a downgrade by JP Morgan to "underweight" from "neutral". British regulators also said they would look into rising landline prices.
TalkTalk has lost nearly a quarter of its value since it reported first-half results last month, and the investment bank said that this "significant pullback ... reflects increased uncertainty about the future trading prospects for the company."
"Execution risk remains high, in our view, and a failure to stabilize the retail customer base could lead to further downgrades to consensus estimates," analysts at JP Morgan said in a note.
Sweden's Elekta also fell 4.6 percent after the medical equipment firm missed expectations with its results.
European stocks fell despite a spate of positive readings from factory figures across the euro zone. PMI data showed that Euro zone manufacturers enjoyed their best month in November since the start of 2014, a survey showed, benefiting from a weaker currency and stronger demand.
Top riser on the STOXX 600 was Banco Popular, up 8 percent. The stock had been down 70 percent year-to-date, but rallied when the bank called an extraordinary board meeting to replace its under pressure chairman.
The stock had also been called to open higher after a report in newspaper Expansion that it was in talks over a possible merger with BBVA or another large lender.
Daily Mail and General Trust rose 6.5 percent after beating earnings expectations despite a decline in ad revenue. Investors were also hopeful of a new strategy which the CEO said would reinvigorate the company's growth. (Editing by Andrew Heavens)