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STOXX 600 off 0.4%

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Tech, industrials and China-exposed luxury firms weigh

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German producer prices ease in Nov

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Orange slips as finance head plans to leaves

Dec 20 (Reuters) - European shares fell on Tuesday, pulled down by rate-sensitive tech and industrial stocks, after the Bank of Japan (BOJ) rattled global markets with a surprise policy shift that would allow long-term interest rates to rise further.

The region-wide STOXX 600 index closed down 0.4%.

The BOJ decided to allow the 10-year bond yield to move 50 basis points either side of its 0% target, wider than the previous 25-basis-point band, in a move aimed at easing some of the costs of prolonged monetary stimulus.

The policy tweak was widely seen as the beginning of a potential end to Japan's ultra-loose monetary policy and comes just as hawkish messages from other major central banks last week doused hopes of an end to monetary policy tightening any time soon.

"It's a very minor policy adjustment. It's just that it's the first from the Bank of Japan from a very long time, perhaps acknowledging that some of the inflation that they're seeing, they will potentially need to react to in the future," said Gerry Fowler, head of European equity strategy at UBS.

"It's a moment where the market is realizing the direction of travel even for the Japanese central bank is to potentially see yields move higher at least in a precautionary way in case they need to deal with persistent inflationary pressures."

Germany's DAX index was down 0.4% as German 10-year bond yields jumped to their highest levels in more than a month. Data showing an easing in producer prices for the second straight month in Europe's largest economy did little to calm market jitters.

With markets heading into the holiday season, the festive cheer has been dampened by the prospect of rates staying higher for longer and hopes for a year-end rally have dimmed.

Rate-sensitive tech stocks declined 1.2%, while industrials followed suit with losses of 0.8%.

Real estate stocks slid 2.2% to hit their lowest in more than six weeks.

The real estate sector was also dragged lower by shares of Aroundtown SA and Derwent London, which fell 9.7% and 2.3%, respectively, after Berenberg cut their price targets.

Limiting losses on the STOXX 600, banks, that often benefit from rising yields, added 2.5%.

China-exposed luxury firms such as the France-based luxury group LVMH fell 0.6% on fears around rising COVID cases in the world's second largest economy. Gucci-owner Kering slid 3.8%.

Shares of Orange slipped 1.0% after the French telecoms group said its deputy chief executive and head of finance is leaving the company.

On a positive note, figures showed euro zone consumer confidence rose by 1.7 points in December from the November number.

(Reporting by Amruta Khandekar and Bansari Mayur Kamdar; Editing by Sherry Jacob-Phillips and Krishna Chandra Eluri)