* Italian banks lead Europe shares higher
* Asia shares gain, investors eye central bank meetings
* Euro dips, yen gains vs dollar
* Brent crude drops below $40 a barrel
By Nigel Stephenson
LONDON, March 14 (Reuters) - European shares followed Asian stocks higher on Monday, adding to gains chalked up after last week's stimulus package from the European Central Bank, while oil prices fell as Iran dashed prospects of a quick deal to freeze output.
Index futures ESc1 1YMc1 suggested Wall Street would open lower, however, pulling back after the Dow Jones Industrial Average .DJI and the S&P 500 .SPX stock indexes hit their highest closes of 2016 on Friday.
After the ECB cut interest rates, extended its asset-purchase programme and pledged new cheap loans for banks last Thursday, attention switches this week to policy decisions from the Bank of Japan (BOJ), the U.S. Federal Reserve, the Bank of England and the Swiss National Bank, among others.
The pan-European FTSEurofirst 300 .FTEU3 stocks index rose 0.8 percent, led higher by Italian banks. Shares fell on Thursday after ECB President Mario Draghi said interest rates were unlikely to be cut further but rose the following day as investors focused on the new loans for banks.
"We believe there is enough value in the sector for continued performance on central bank stimulus - with peripheral banks likely to lead the way," said RBC Europe analyst Robert Noble.
In Asia, MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 0.8 percent, while Japan's Nikkei stock index .N225 added 1.7 percent.
The BOJ began a two-day policy meeting on Monday and was expected to keep policy unchanged after adopting negative interest rates in late January.
In China, the CSI300 stocks index .CSI300 closed 1.6 percent higher and the Shanghai Composite rose 1.8 percent.
Mainland investors were encouraged by a regulator's assurance it was premature to consider withdrawing government bailout funds from the market, and comments that dispelled fears of a flood of initial public offerings. Fed, which ends its policy meeting on Wednesday, has said it is on track to raise rates gradually in 2016, but this will hinge on the health of the economy. Recent data has shown above-forecast jobs creation but wage growth remains a concern.
The euro EUR= , which rose after Draghi signalled yet lower rates were unlikely, fell 0.4 percent on Monday to $1.1111, having set a one-month high of $1.1218 on Thursday. The yen JPY= strengthened 0.1 percent to 113.68 per dollar. Sterling GBP= fell 0.4 percent to $1.4336.
"The (Fed) meeting could see an acknowledgement of slightly improved conditions ... the Fed wants to make sure these developments have taken hold before acting. Such a dovish message could see downward pressure on the dollar," said Josh O'Byrne, currency strategist at Citi.
OIL TALKS
Benchmark Brent crude oil LCOc1 , whose rise has helped buoy stocks in recent weeks, fell below $40 a barrel, after Iran's oil minister said on Sunday the OPEC member would join discussions only once its own output reached 4 million barrels a day. Brent last traded at $39.68, down 71 cents.
The Iranian and Russian energy ministers were meeting in Tehran on Monday, the Russian ministry said on Twitter (NYSE:TWTR).
Yields on lower-rated euro zone government bonds, seen as the main beneficiary of the ECB's package of interest rate cuts and other measures, fell towards lows touched after the meeting.
German yields briefly underperformed after voters signalled disapproval of Chancellor Angela Merkel's open-door refugee policy in regional elections.
German 10-year yields DE10YT=TWEB fell 1.7 basis points to 0.26 percent. Lower-rated Italian equivalents IT10YT=TWEB were last down 1.3 bps at 1.32 percent.
With investors nervous before the Fed meeting, gold XAU rose towards last week's 13-month high, last trading at $1,255.