Oils drag European shares down; Anglo American up

* FTSEurofirst 300 index down 1.2 pct

* Anglo American surges on Xstrata merger talks

* Oils down as crude retreats

By Joanne Frearson

LONDON, June 22 (Reuters) - European shares were lower in morning trade on Monday, as weakness in energy stocks overshadowed gains in the miner Anglo American after Xstrata said it wanted merger talks.

By 0836 GMT, the pan-European FTSEurofirst 300 <.FTEU3> index of top shares was down 1.2 percent at 851.12 points, after gaining 1.3 percent on Friday.

German Ifo index rose for the third month running in June to reach its highest level in seven months, but failed to lift the market.

"(The markets) had a good day on Friday so it is a bit of a move back from that... I do not think there is anything there," said Bernard McAlinden, strategist at NCB Stockbrokers.

"I think as long as these European PMI figures and the U.S. Richmond Fed index hold up or make gradual recovery back towards neutral level tomorrow I think the markets look ok."

"There is plenty of liquidity around and the Fed will probably be confirming this week they have no plans to hike interest rates. It is really the vulnerabilities surrounding whether these indicators indicate ongoing movement back towards neutrality. That is the most important. It is down to data this week," he said.

Miners added the most points to the index. Anglo American soared 9.1 percent after Xstrata said on Sunday it wanted talks with the group about a proposed merger of equals worth about $68 billion, seeking increased scale and cost synergies. [ID:nLL443532]

Xstrata was down 4.3 percent.

Other miners were hit by falling metal prices with copper down 1.7 percent. Antofagasta , BHP Billiton , Eurasian Natural Resources Corporation and Rio Tinto were 0.7-1.4 percent lower.

Energy stocks were lower as crude fell to around $69 a barrel, extending the previous session's drop of more than 2 percent.

BG Group , BP , Royal Dutch Shell and Total were down 0.6-1.1 percent.

BANKS FALL

Banks were also in the doldrums, although stocks within the sector were mixed. Banco Santander , Barclays , Deutsche Bank and UBS were down 1.1-1.8 percent.

In individual stocks movers, British Airways was down 4.1 percent after the Daily Telegraph said it had clashed with its pension trustees over a higher-risk investment strategy that it believes has exacerbated the deficit in the fund, now thought to top 3 billion pounds.

French retailer Carrefour gained 2 percent after Merrill Lynch upgraded its rating on the stock to "neutral" and raised its price target to 32 euros from 26.5 euros.

On Tuesday investors are likely to watch for the release of Eurozone PMI figures and the U.S. Richmond Federal index.

"Unless there is going to be bad news then no one is going to be driving the market in any particular direction," said Justin Urquhart Stewart, director at Seven Investment Management.

Across Europe, the FTSE 100 <.FTSE> index was down 1.3 percent, Germany's DAX <.GDAXI> was down 1.4 percent and France's CAC 40 <.FCHI> was down 1.5 percent. (Editing by Mike Nesbit)