UPDATE 1-European shares pause for breath; Carillion rivals gain

* STOXX 600 down 0.1 pct

* Cyclical stocks weigh

* UK small-cap Carillion collapses (Adds detail and quotes, updates prices)

LONDON, Jan 15 (Reuters) - European stocks got off to a sluggish start on Monday following two weeks of gains, with cyclical stocks among the biggest decliners, while M&A remained in focus.

Shares in some competitors of Carillion rose after the long-struggling construction and support services company collapsed, with banks refusing to lend it any more money.

"People will pick up business and for some it will be good. JV arrangements will also get triggered where they take on the majority share of the contracts," said a sector analyst at a UK broker, citing Serco in healthcare.

Among Carillion competitors, Serco jumped 4.7 percent and Interserve 1.5 percent, Balfour Beatty 0.6 percent and Kier Group 0.8 percent.

While the STOXX has seen a strong start to 2018 and has held at its highest levels since August 2015, weakness among banking stocks and energy kept the index in negative territory, while a stronger euro also added pressure.

"European equities have been on a tear since the beginning of 2018, and we were due some form of a pullback," Jonathan Roy, market strategist at Ocean Capital Group, said.

"What we're going to have to see now are economic figures coming through as strong as they have been."

The pan-European STOXX 600 index was down 0.1 percent in at 1007 GMT, while Euro zone blue chips also declined 0.1 percent. So-called cyclical stocks, whose profits are most sensitive to the strength of the economy, have been the best equity sector performers this year.

Finnish mining equipment maker Metso was the biggest faller on the STOXX, dropping nearly nine percent after its fourth-quarter earnings missed expectations.

Likewise German retailer Metro dipped more than three percent after giving a sales update, with its Russian business showing a slowdown in sales for the key Christmas quarter.

"Russia is likely to be the catalyst for any share price re-rating, and there is no sign of any progress yet on this front," analysts at Raymond James said in a note.

Meanwhile GKN saw its shares rise 3.3 percent after suitor Melrose said it planned to meet shareholders of the British automotive and aerospace equipment maker following a rejected takeover offer.

Shares in Italy's Azimut Holding were the top risers, up 6.8 percent after the company reported 2017 preliminary results.

(Reporting by Kit Rees and Tom Pfeiffer, Editing by William Maclean)