UPDATE 2-European shares slip from October highs as banks weigh

* STOXX falls by 0.2 pct

* HSBC down as 2018 profit disappoints

* Wirecard extends rally after short selling ban

* Heidelbergcement gains on strong guidance (Adds closing prices)

By Julien Ponthus and Danilo Masoni

LONDON, Feb 19 (Reuters) - European shares dipped on Tuesday as a disappointing update from HSBC hit the heavyweight banking sector and a rally fuelled by optimism about a possible Sino-U.S. trade deal ran out of steam.

A new round of talks between the United States and China was taking place in Washington on Tuesday. The talks follow negotiations that ended in Beijing last week without a deal but which officials said had generated progress. touching its highest level since Oct. 10 on Monday, the STOXX 600 .STOXX index pulled back, falling 0.2 percent, while Germany's DAX .GDAXI inched 0.1 percent higher and France's CAC .FCHI was down 0.2 percent.

"The positivity regarding a potential US-China trade deal will soon be fully priced in," said Forex.com analyst Fawad Razaqzada.

Banks .SX7P fell 0.9 percent, the worst-performing sector.

HSBC HSBA.L dropped 4 percent after the bank reported a disappointing annual profit as higher costs and a stocks rout chipped away at its trading businesses. of America Merrill Lynch downgraded its rating for the stock to "neutral" following the release of its results, saying there is "limited upside" for the share price.

Italian banks .FTIT8300 fell around 1 percent as weak industrial data drove government bond yields higher. .SXAP managed to end slightly up, even though caution prevailed on uncertainty over whether U.S. President Donald Trump would ultimately impose tariffs on car imports.

Results drove the biggest moves on the stock level.

Danish hearing-aid maker William Demant WDH.CO skidded 9.2 percent after a disappointing guidance on full-year core profits. HEIG.DE jumped 3.6 percent as it forecast a rise in demand and margins this year following a tough 2018 and announced plans for its long-standing CEO to step down next year. cost pressure is easing and problem markets, Indonesia in particular, are becoming less problematic," Davy Research analysts said. "Today's update should reassure investors that the group is back on track."

Dental implant maker Straumann STMN.S gained 5.5 percent after reporting its fastest sales growth in 13 years. the key drivers remained intact and we expect several launches in 2019 to support the continued momentum," said Jefferies analysts.

Wirecard WDIG.DE was up 4.6 percent in the second day of a rally after Germany's financial watchdog banned short selling of the stock due to volatility, following reports in the Financial Times which are now the subject of an investigation by German authorities. PSMGn.DE shares fell 3.4 percent after business monthly Manager Magazin reported two board members will leave the company shortly. PNDORA.CO shares tumbled 2.7 percent after a "trading sell" note from Carnegie, among the top-ranked analysts covering the stock, while SEB also reinstated a "sell" on the stock, traders said. argue that Pandora's charms/bracelet concept 'Moments' is drifting out of fashion," SEB analysts wrote.