UPDATE 2-European shares dip on pharma drag as Fed optimism sizzles out

* Healthcare stocks drag on the benchmark index
* Powell-fuelled rally fades out
* Bank-heavy Milan and Marid stocks outperform

(Recasts, updates to close, changes quote)
By Agamoni Ghosh
July 11 (Reuters) - European shares closed at a two-week low
on Thursday weighed down by pharma stocks on worries that U.S.
government may intervene on high drug prices, while optimism
from the Federal Reserve's dovish stance faded away.
The pan-European stocks benchmark .STOXX rallied earlier
in the day on remarks from Fed Chair Jerome Powell but reversed
course in late afternoon trading to close 0.1% lower.
The White House announced that it was ditching its push for
changes to the pharma rebate structure, providing some relief to
health insurance companies but hurting drugmakers, including
those in Europe. Novo Nordisk NOVOb.CO , UCB UCB.BR , Astrazeneca AZN.L
and Roche ROG.S all ended nearly 2% lower, dragging the pharma
index .SXDP down 0.7%, the biggest weight on the benchmark.
"Most drugmakers supported the initiative to eliminate
rebates but now we see no solution to the challenges
manufacturers face regarding growing rebates, " Morgan Stanley
said in a note.
"The lack of progress in Washington suggests that the
industry will face ongoing political pressure, including
legislative risk."
Also pressuring the sector was German medical imaging
equipment maker Siemens Healthineers SHLG.DE which slid 6% on
worries about the performance of its Diagnostics business.
Auto stocks .SXAP ended 0.6% lower as a slew of warnings
by small-cap auto/industrial suppliers hit large-cap car parts
suppliers such as Valeo VLOF.PA and Continental CONG.DE. .
Bank of America Merrill Lynch warned in a note that
depressed production for the sector across regions is unlikely
to pick up materially in the near-term.
Also weighing on sentiment was the International Monetary
Fund's warning that the euro zone may see prolonged anemic
growth, backing the European Central Bank's (ECB) plans for
fresh stimulus.
Among bright spots, the energy sector .SXEP gained the
most as oil prices hit six-week highs, while banks .SX7P
outperformed pushing the bank-heavy Milan .FTMIB and Madrid
indexes .IBEX higher. O/R
Bucking the broader pharma trend, German drugmaker
Gerresheimer AG GXIG.DE rose 13% to the top of the STOXX 600
after confirming revenue guidance for the year and posting
strong second quarter results.
Despite the recent bout of losses, the STOXX 600 has
recouped its May losses, gaining around 6% since then, mostly on
expectations that major central banks will adopt a looser
monetary policy.