European shares weighed down by weaker banks, Bayer drop

* STOXX 600 down 0.2 pct, index down 7 percent this year

* Banks hit by profit taking, led by Italian lenders

* Bayer drags down chemical sector after bond

* Hugo Boss slumps as revival plan seen taking time (ADVISORY- Follow European and UK stock markets in real time on the Reuters Live Markets blog on Eikon, see cpurl://apps.cp./cms/?pageId=livemarkets)Adds detail, closing prices)

By Danilo Masoni

MILAN, Nov 16 (Reuters) - European shares fell on Wednesday, weighed down by a pull-back in banking stocks, while German chemical group Bayer slumped after a costly bond issue.

The STOXX 600 fell 0.2 percent. The index is down 7 percent so far this year but has gained ground since Donald Trump's surprise U.S. presidential election victory last week.

After an initial euphoric reaction to expectations of big stimulus under Trump's administration, which boosted cyclical sectors such as banks, investors had become more cautious.

"Market participants are trying to assess the impact of the Trump's victory. But I expect rotation from low volatility sectors such as utilities into banks or tech companies to continue until the end of the year," said Stephane Ekolo, chief European strategist at Market Securities in London.

After hitting a fresh eight-month high, Europe's bank index turned lower as profit taking kicked in. The index fell 1.2 percent, making it the biggest sectoral loser in Europe, with Banca Popolare di Milano and other Italian lenders leading the selloff.

Analysts expect Italian banks, already hit by worries over capital levels and bad loans, to underperform should Italians reject Prime Minister Matteo Renzi's constitutional reform plan in a referendum on Dec. 4.

Deutsche Bank have forecast that banks could push Italy's blue chip FTSE MIB index down by 6 percent by early 2017 if the "No" campaign wins, which is its base case scenario.

Europe's chemical index fell 1.2 percent, hit by a 4.2 percent drop in Bayer after the company placed 4 billion euros of bonds to help finance its Monsanto takeover.

Baader Bank analyst Markus Mayer confirmed his hold rating on Bayer but said the high coupon the company would pay on the new debt was a negative.

"The 300-400 basis points premium on the average of other deals is high ... makes the Monsanto takeover even more value destroying and might mirror the insecurity on the deal and the pending capital raise," he wrote in a note.

Among the top risers, German payment processor Wirecard rose 7.5 percent after an upbeat 2017 outlook, while France's Bouygues also rose 2.7 percent after maintaining its outlook following a forecast-beating rise in third quarter operating profit.

Hugo Boss slumped 10.2 percent after its new CEO said a plan to revive the struggling German fashion house by cutting brands and seeking to appeal to fashion-conscious younger customers will only bear fruit from 2018.

(Additional reporting by Kit Rees; Editing by Catherine Evans)