Commerzbank gains on merger talks with Deutsche Bank
HSBC falls on Exane BNP Paribas downgrade
STOXX 600 off 0.1

Jan 15 Reuters European shares edged lower on Monday as government bond yields rose on warnings of premature rate cuts from the European Central Bank, while losses in Dassault Aviation39;s shares on missing aircraft delivery target added to declines.

The panEuropean STOXX 600 was down 0.1 lower by 0934 GMT, dropping from a 0.2 rise in early trading.

Euro zone government bond yields rose during the session as investors digested comments from the ECB39;s chief economist Philip Lane, who said in an interview on Saturday that cutting rates too fast could fuel a new wave of inflation.

The euro zone39;s benchmark German 10year yield last stood at 2.184.

We do have this disjoint between market expectations and what central banks are planning on doing, said Daniela Hathorn, senior market analyst at Capital.com.

We could see some downside pressure for equities, especially in Europe, once markets adjust their expectations that rate cuts are inevitably going to come, but not as soon as expected.

Traders are still pricing in around 150 basis points of rate cuts this year, with a near30 chance of the first cut as soon as in March. 0ECBWATCH

Shares of Commerzbank moved up 1.5 after talks of a merger with Deutsche Bank resurfaced, according to a source familiar with the matter.

Banks, however, were down 0.4 as HSBC lost 2.1 after Exane BNP Paribas cut the…