UPDATE 2-European shares dip after strong rally

* STOXX 600 retreats after rising almost 4% this month

* German exports eke out December rise on brisk China trade

* Home builders help London shares outperform
(Updates to close)

By Shreyashi Sanyal and Susan Mathew

Feb 9 (Reuters) - European shares ended lower on Tuesday
after a rally powered by hopes of a swifter global economic
recovery and vaccine rollouts showed signs of cooling.

Utilities and the oil and gas sector led
losses and countered gains in luxury and healthcare
stocks.

The STOXX 600 index finished 0.1% in the red after
having lost up to half a percent during the day. The index has
gained nearly 4% so far this month against the backdrop of
steady vaccine rollouts globally and expectations that U.S.
lawmakers will soon pass a huge stimulus package.

London stocks outperformed with homebuilders
in the lead. Bellway and St Modwen Properties
joined bigger rivals Barratt and Taylor Wimpey
in providing a robust outlook for the sector as demand improved
after initial COVID-19 disruptions.

"We think that UK equities will outperform their peers
elsewhere this year, as some of the headwinds that they faced in
2020 fade or even act as tailwinds," Capital Economics wrote in
a client note.

They cite rapid coronavirus vaccine rollout in the country
aiding rotation towards pandemic-vulnerable sectors, and removal
of uncertainties regarding its relationship with the European
Union as some of the factors behind the view.

Energy major Total SE fell 1.8% after having risen
as much as 2.8%. It posted better than expected earnings in the
fourth quarter, although a hit from writedowns on assets due to
the pandemic landed it with a $7.2 billion net loss for 2020.

Germany's DAX index was down 0.3% even as data
showed German exports rose in December as robust trade with
China and the United States helped.

"The longer-term outlook (for exports) remains mixed,
illustrating that the sector will still take some time before
returning to full strength," said ING's global head of macro,
Carsten Brzeski.

Among earnings, hearing aid maker Demant topped
the STOXX 600 after saying it expects to return to strong growth
in 2021 as COVID-19 lockdowns are lifted.

Shares in Lonza rose 3.1% on a $4.7 billion deal to
sell its Specialty Ingredients devision to Bain Capital
and Cinven.

TUI Group shed almost 4% to hit a more than
two-month low after the world's biggest holiday company sunk to
a 699 million euros ($844 million) loss in its first quarter.
(Reporting by Shreyashi Sanyal in Bengaluru; Editing by Shounak
Dasgupta and Barbara Lewis)