By Matteo Allievi and Shreyashi Sanyal
(Reuters) -European shares inched higher on Monday with the travel & leisure sector leading gains, helping to limit the impact of weak inflation data from China that highlighted sluggish demand in the world's second-largest economy.
The pan-European STOXX 600 index ended 0.2% higher after recording its worst weekly performance in almost four months on Friday.
European travel & leisure stocks gained 1.3%, attempting to rebound from falls of over 4% last week. The index was among top decliners last week.
"Equities recover in Monday trading," said Chris Beauchamp, chief market analyst at online trading platform IG.
"Friday's gloomy atmosphere has faded to an extent today and stocks have attempted to regain some lost ground."
Data on Monday showed China's producer prices fell at their fastest pace in over seven years in June, while consumer prices teetered on the edge of deflation, adding to the case for more stimulus to revive demand.
China-exposed miners slid 0.6% as metal prices dipped. [MET/L]
"While inflation shows signs of stubbornness in other economies, disinflationary forces are at work in China," said Susannah Streeter, head of money and markets at Hargreaves Lansdown (LON:HRGV). "The initial pent-up demand after the pandemic restrictions were lifted is fizzling out."
Also pressuring the main STOXX 600 was a 1.1% decline in shares of Novo Nordisk (CSE:NOVOb).
The European Medicines Agency (EMA) is investigating the company's diabetes drug Ozempic and weight-loss treatment Saxenda after Iceland's health regulator flagged three cases of patients thinking about suicide or self-harm.
European stocks have been recently pressured by hawkish messages from central bank policymakers and resilient U.S. economic data fuelled concerns that interest rates will remain elevated for a longer period.
U.S. consumer prices data scheduled for Wednesday is expected to show a slowdown in June inflation.
Traders will also monitor the kickoff of the U.S. earnings season later this week. The reports from big banks such as JPMorgan (NYSE:JPM), Wells Fargo (NYSE:WFC) and Citigroup (NYSE:C) will provide a snapshot of the health of the economy.
Bayer (ETR:BAYGN) rose 1.6% following a report that the German drugs-to-pesticides giant could spin off and list its CropScience unit.
Wihlborgs Fastigheter fell 7.8% after the Swedish real estate firm reported its first-half results and noted an uncertain outlook for Sweden's economy.
Scout24 dropped 3.1% after UBS downgraded the online property platform to "sell", citing pressure on the German housing market.