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* STOXX Europe 600 falls 0.3 percent
* Italian index rises 1 pct led by banks
* OPEC deal boosts oil sector
* Banco Popular rallies after chairman change
* TalkTalk, Elekta among top fallers
By Danilo Masoni
MILAN, Dec 1 (Reuters) - Italian shares rose to a three-week high on Thursday, outshining weaker European markets, with banks in demand as concerns eased over Sunday's referendum on Prime Minister Matteo Renzi's constitutional reform.
The Pan-European STOXX 600 index fell 0.3 percent, while the Milan blue chip index rose 1 percent to its highest intraday level since Nov. 10.
The Italian stock market remains the worst performer in Europe this year with a fall of more than 20 percent due to the problems of its banks and concerns over political instability.
Opinion polls conducted until a blackout period began last week showed the "no" vote comfortably in the lead, raising concerns of a political crisis and fuelling market volatility
But fund mangers and brokers have been analyzing social media trends, concluding that the "Yes" front was narrowing its disadvantage. Investors fear that if the "No" wins it will be difficult to carry out large cash calls at ailing bank Monte dei Paschi and UniCredit.
"Certainly worries about the referendum have eased with unofficial surveys pointing to a narrowing of the gap between the two fronts," said Anthilia fund manager Giuseppe Sersale, adding that short-covering also helped explain the bounce.
An Italian government undersecretary said Monte dei Paschi would not need state aid and was confident the bank would be able to raise the capital it needs on the market.
Italy's bank index, which has lost half of its value this year, rose 2.6 percent in its third straight session of gains, helping Europe's bank index rise 1.2 percent.
Activtrades chief market analyst Carlo Alberto De Casa said expectations the European Central Bank would step in if the results of the referendum created market turmoil also helped.
Spain's Banco Popular was the top gainer among European banks with a rally of 13 percent. The lender, seen as the weak link in Spain's banking sector, is to replace Chairman Angel Ron after shareholders rebelled over his lacklustre progress in cleaning up 30 billion euros in toxic assets.
Its shares were also underpinned by a report in Spanish newspaper Expansion that it was in talks over a possible takeover by BBVA or another larger rival. Both declined to comment.
Shares in Danish telecoms group TDC dropped 6.8 percent, making it one of the top fallers on the STOXX after media reports that the American hedge fund Apollo had withdrawn a takeover bid.
Pharma and consumer stocks were the biggest drag on the STOXX, with shares in heavyweights such as Novartis, Roche, Nestle, and Unilever all down between 1.6 and 2.8 percent.
Among the top fallers was telecoms firm TalkTalk, down 4.5 percent, after a downgrade by JP Morgan to "underweight" from "neutral". British regulators also said they would look into rising landline prices.
Sweden's Elekta fell 1.3 percent after the medical equipment firm missed expectations with its results.
Commodity stocks rose after oil-producing countries came to a deal to limit oil output. The STOXX Europe 600 Oil and Gas index was up 1.8 percent, while the basic resources index rose 1.8 percent.
Daily Mail and General Trust rose 2.9 percent after beating earnings expectations despite a decline in ad revenue. Investors were hopeful of a new strategy which the CEO said would reinvigorate the company's growth. (Reporting by Danilo Masoni; additional reporting by Alistair Smout; Editing by Mark Trevelyan)