European shares shrug off four percent drop for Italian banks

MILAN (Reuters) - A slump in Italian banking stocks, hit by worries that efforts to clean up bad debts would get derailed by the onset of political uncertainty, was offset by gains in European healthcare and mining stocks helping the regional benchmark to rise more than 1 percent on Monday.

Prime Minister Matteo Renzi resigned after a crushing defeat in a referendum on constitutional reform.

By 0830 GMT, the pan-European STOXX 600 (.STOXX) index was up 1.2 percent, quickly recovering from a small dip at the open. The mining sector index (.SXPP) topped sectoral gainers, up 2.3 percent, on the back of rising copper prices while healthcare stocks (.SXDP) rose 1.4 percent.

Italian banks fell 4.2 percent, taking year-to-date losses to 50 percent for the world's worst performing banking sector. Monte dei Paschi di Siena (BMPS.MI) fell as much as 7 percent while Unicredit (CRDI.MI) fell 4.8 percent.

The outcome of the Italian referendum raised doubts over whether Monte dei Paschi would go ahead with a vital cash call. Morgan Stanley said in a note this morning that state aid for the troubled lender looked increasingly likely.

(Reporting by Danilo Masoni)