By Danilo Masoni and Helen Reid

MILAN (Reuters) - After a choppy day, European shares sealed their worst month and first quarterly loss in a year as worries over signs of tightening monetary conditions soured the mood.

The pan-European STOXX 600 <.STOXX> index closed down 0.3 percent and euro zone blue chips <.STOXX50E> fell 0.9 percent, while Britain's FTSE 100 <.FTSE> fell 0.5 percent.

The STOXX was down 2.7 percent in June, following four straight months of gains driven by an easing of political worries in the euro zone and brighter economic prospects.


But hawkish remarks from central bankers this week that boosted bond yields and the euro sparked a broad sell-off, with stocks that benefit from lower rates and export-oriented companies particularly under pressure.

These jitters, along with concerns about high valuations in equities globally, led European equities to a modest quarterly loss of 0.5 percent, despite a market-friendly outcome to May's presidential elections in France that sparked a new wave of buying.

"In absolute terms, European equity valuations look extended...," said Pierre Bose, head of European strategy at Credit Suisse. "To be more constructive on equities you would need a consolidation from these levels."

Sectoral moves were muted on Friday. While banks <.SX7P>, which benefit from higher rates, bucked their recent rally to fall 1 percent, tech stocks <.SX8P> rebounded, up 0.4 percent to lead gainers.

In an otherwise thin day for big company news, Bayer <BAYGn.DE> was an exception.

Its shares sank as much as 5.4 percent after the German drugmaker warned it would have to adjust its full-year outlook, citing excessively high inventory levels at crop protection customers in Brazil and a weaker-than-expected consumer health business.

Its shares weighed on Europe's chemicals index <.SX4P> which fell 1.4 percent, leading sector losers.

Construction and materials stocks <.SXOP> steadied after a sharp sell-off in the previous session. Bernstein analysts pointed to the sector still being a strong growth area.

"After the recent derating the sector is no longer expensive relative to the market, trading in line with or below long-term history on a number of metrics," they said.

Adidas <ADSGn.DE> also ran ahead of the pack, up 2.1 percent and the top DAX gainer after its competitor Nike reported strong figures, but analysts said the German firm had better brand momentum.

Unipol was another bright spot, up 3.8 percent after the Italian financial group said it would shift 3 billion euros of bad loans from its banking unit to a special vehicle as part of broader plans for an overhaul.

Under the reorganisation, Unipol will sell stakes in insurance companies to its insurance arm Unipol SAI <US.MI>.

"We believe that the price of the sale of the insurance stakes to UnipolSai is fair. The other measures announced aim to create the conditions to finalize the merger between Unipol and UnipolSai," Banca Akros analyst Enrico Esposti said.

Unipolsai fell 3.6 percent, as analysts saw the insurance arm as bearing the cost of the clean-up.

Among top fallers on the STOXX was British pub chain and brewer Greene King <GNK.L>, down 3.7 percent following a downgrade to neutral from JP Morgan, while oilfield services firm Subsea 7 <SUBC.OL> added 2 percent after an acquisition.

(Editing by Ed Osmond and John Stonestreet)

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