Banks drag European stocks lower; drugmakers rise

* FTSEurofirst 300 index down 1 percent

* Banks fall; drugmakers rise * For up-to-the-minute market news, click on [STXNEWS/EU]

By Joanne Frearson

LONDON, Sept 1 (Reuters) - European shares fell in morning trade on Tuesday in a choppy session, with the banking sector dragging the main index lower overshadowing gains in defensive drugmakers.

By 0838 GMT, the pan-European FTSEurofirst 300 <.FTEU3> index of top shares was down 1 percent at 962.03 points having earlier been up as much as 978.68 points.

The index rose 4.7 percent in August and is up nearly 50 percent from its lifetime low on March 9, as investors have become more confident on the prospects of economic recovery.

"Defensives had been leading the way this morning, so it looked like the market was not feeling altogether happy with things," said Mike Lenhoff, strategist at Brewin Dolphin.

"Maybe the market is just a bit uncomfortable at having progressed non stop against a background of incredibly good newsflow. The market has been looking overbought so maybe technically it is just up with events and apprehensive about storming ahead with no consolidation or pause for breath," he said.

Banks took the most points off the index. HSBC , Lloyds Banking Group , BNP Paribas , Barclays and Credit Suisse were down 1.9 to 3.2 percent.

The exception was Commerzbank which was up 4.1 percent after CEO Martin Blessing told one newspaper that the company may return to profit next year.

Miners were lower as copper slipped 3.2 percent following a sell-off in Shanghai. Anglo American , Antofagasta , BHP Billiton , Eurasian Natural Resources Corporation and Xstrata were down 1.8 to 5.6 percent.

Energy fell as crude stayed at $70 a barrel following a 4 percent drop overnight. Royal Dutch Shell , BP and Total were down 0.5 to 1.7 percent.

Across Europe, the FTSE 100 <.FTSE> index was down 1.4 percent, Germany's DAX <.GDAXI> was 1.6 percent lower and France's CAC 40 <.FCHI> was down 1 percent.

ASTRAZENECA GAINS

Drugmakers were the biggest risers on the index. AstraZeneca gained 1.6 percent, boosted by impressive trial results with its experimental blood thinner Brilinta, a rival to Sanofi-Aventis and Bristol-Myers Squibb's $9 billion-a-year blockbuster Plavix.

Sanofi-Aventis was 1.3 percent higher, while GlaxoSmithKline , Novartis and Roche were up 0.5 to 1.2 percent.

Chemical company BASF was 0.5 percent higher following reports in a German daily that Chinese state-owned companies might be interested in buying a stake in the company.

Europe's largest entertainment group Vivendi was up 1.5 percent after second-quarter earnings beat forecasts.

Looking at macro economic news, investors will eye the U.S. National Association of Realtors releases Pending Home Sales for July at 1400 GMT. Economists in a Reuters survey expect a 2.0 percent rise compared with a 3.6 percent increase in the previous month.

"U.S. pending home sales today is all about house prices as activity or contribution to the economy has become very small. Anything that shows new home sales rising and inventories falling is good as it strengthens the case home prices are stabilising," said Bernard McAlinden, market strategist at NCB Stockbrokers.

Earlier, the Markit Eurozone Manufacturing Purchasing Managers Index for August jumped to 48.2 from 46.3 in July, above economists' forecasts and revised up from the 47.9 flash reading, but still well below the 50.0 mark that divides growth from contraction. [ID:nLAG003701] (Editing by Mike Nesbit)