UPDATE 2-European shares end lower as Italy's political crisis weighs

* Italy's PM Conte to resign
* Banks, miners biggest decliners
* Pandora tops STOXX 600 after keeping FY forecast

(Recasts, changes comments; Updates to close)
By Agamoni Ghosh
Aug 20 (Reuters) - European shares fell on Tuesday after two
sessions of robust gains as optimism over hopes of stimulus in
major economies waned and investors awaited more guidance from
central banks.
Concerns about Italy's government further dented sentiment,
though Italian bond yields fell after Prime Minister Giuseppe
Conte said he would resign, potentially paving the way for a new
coalition government.
Markets in Italy have been volatile since the leader of the
League, Matteo Salvini, pulled support from his coalition
arrangement with the 5-Star Movement on August 8.
Milan's blue-chip index .FTMIB ended 1.1% lower, a
reaction that analysts said was relatively mild because the
possibility of the prime minister's resignation was more or less
priced in and after Salvini said he was ready to keep the
coalition government alive to approve a 2020 budget before
heading to early elections. "Cracks had already appeared in the Italian ruling coalition
ever since Salvini called for a breakup of that union earlier
this month," said Joshua Mahony, senior market analyst at IG
Group.
The pan-European STOXX 600 index .STOXX which rose in the
early hours of trading reversed course in the afternoon to end
0.7% lower. Madrid shares .IBEX led the declines.
All sub-sectors ended in the negative with interest-rate
sensitive banks .SX7P weighing the most on the benchmark
index. Eurozone bond yields also fell back towards record lows.
GVD/EUR
The basic resources sector .SXPP fell over 1% after BHP
BHPB.L said that headwinds to global growth could hit demand
for its main commodities, iron ore and copper.
In a bright spot, Pandora, the Danish jewelry maker,
PNDORA.CO jumped over 10% to the top of the STOXX 600 index.
Despite a drop in second-quarter earnings, Pandora maintained
its full-year forecast
European equities had staged a comeback in the last two
sessions on growing hopes that central banks and governments
will step in to help global economies stave off a recession.
However, the pan European STOXX 600 .STOXX index is still
down 3.4% for month so far, lagging the 10-year average.
"Markets are still very cautious and the sentiment is still
quite fragile because there are still so many potential crises
looming," said Teeuwe Mevissen, senior market economist at
Rabobank.
"Also there are relatively low volumes which could swing
markets wildly in either direction."
Investors will now be looking forward to the Jackson Hole
Symposium on Thursday where substantive comments from U.S.
Federal Reserve Chief Jerome Powell and European Central Bank
head Mario Draghi are expected.