Europe shares drop after German inflation data

The pan-European STOXX 600 ended up 0.1%, after recording its first weekly gain in four weeks on Friday

European shares closed below day highs on Monday after Germany reported higher-than-expected inflation, while Deutsche Bank had its worst day in more than a year as concerns around its Postbank acquisition resurfaced.

The pan-European STOXX 600 ended up 0.1%, after recording its first weekly gain in four weeks on Friday.

The STOXX 600 lost some steam in April after five consecutive 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 slid 0.3% after German preliminary data, ahead of Tuesday's euro zone release, showed national inflation rose slightly in April because of higher food prices and a smaller decline in energy prices than in previous months.

The overall trend for German inflation is downward. This should allow the European Central Bank 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, according to Anja Sabine Heimann, an economist at HSBC.

Markets are pricing in nearly 66 bps of ECB rate cuts by year-end, per LSEG data.

Meanwhile, Philips soared 29%, topping the benchmark index, as the Dutch firm announced a smaller-than-expected figure for claims over its recalled breathing devices in the US. The news ended the uncertainty that had slashed its market value in the last three years.

With Philips' shares hitting their highest in more than two years, the healthcare sector rose to a more than one-month high.

On the flip side, Deutsche Bank dropped 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.