By Ankika Biswas and Johann M Cherian
(Reuters) -European shares closed below day highs on Monday after Germany reported higher-than-expected inflation, while Deutsche Bank (ETR:DBKGn) had its worst day in over a year as worries around its Postbank acquisition resurfaced.
The pan-European STOXX 600 closed up 0.1%, after logging its first weekly gain in four weeks on Friday.
The STOXX 600 lost some steam in April after five straight months of gains, weighed by still high interest rates, continued Middle East tensions and uncertainty about the European Central Bank's policy outlook. The European benchmark is on track for its worst month in half a year if losses hold.
Germany's DAX slipped 0.3% after German preliminary data, ahead of Tuesday's euro zone release, showed national inflation rose slightly in April due to higher food prices and a smaller drop in energy prices than in previous months.
"The overall trend for German inflation is downward ... this should allow the ECB to follow up on a first rate cut in June with more cuts, even though the resilience in services inflation creates some uncertainty on the pace of cuts after June," said Anja Sabine Heimann, an economist at HSBC (LON:HSBA).
Markets are pricing in around 66 basis points (bps) of ECB rate cuts by year-end, according to LSEG data.
Meanwhile, Philips (LON:0LNG) surged 29%, topping the benchmark index, as the Dutch firm announced a smaller-than-expected figure for claims over its recalled breathing devices in the United States. The news ended the uncertainty that had slashed its market value in the past three years.
With Philips' shares touching their highest in more than two years, the healthcare sector rose to an over one-month high.
On the flip side, Deutsche Bank fell 8.6% as the lender reported a legal provision it will make over a litigation regarding its takeover of Postbank was set to hurt its second-quarter and full-year profitability.
In Spain, Prime Minister Pedro Sanchez said he had decided to stay in office after days of publicly weighing his future, though questions remained how the drama surrounding his decision will affect his standing. The Spanish index closed 0.5% lower.
Later in the week, investors also await the Federal Reserve's monetary policy decision and any hints on the outlook for its monetary policy easing.
Among others, Norway's Public Property Invest, partly owned by indebted Swedish real estate group SBB, lost 1.4% on its Euronext Oslo market debut.
Atos jumped 19% as the French government made an offer to buy out some of IT firm's key units, while Porsche (ETR:P911_p) lost 2.8% following a 30% drop in first-quarter operating profit.