UPDATE 1-European stocks retreat after record highs, Deutsche Bank lagging behind

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* STOXX 600 eyes fourth month of earnings

* Deutsche Bank slips on Fed warning report

* Trading volumes are light as US and UK markets close (add comments, update prices)

May 31 (Reuters) – European stocks slipped on Monday after record highs in a moderate price due to vacations in major markets, but optimism over a rapid economic recovery put the benchmark on track for his fourth month of earnings.

The pan-European STOXX 600 index was down 0.1% in morning trading, shares of Frankfurt down 0.3% and Paris down 0.1%.

The UK and US markets are closed for a public holiday, which keeps trading volumes muted at all levels.

Deutsche Bank, down 1.8% after the Wall Street Journal reported that the US Federal Reserve told the German lender that it was not addressing persistent weaknesses in its anti-money laundering controls, was among the main brakes.

Italian insurer Cattolica jumped 12.9% after its biggest rival, Assicurazioni Generali, announced it would launch a € 1.17 billion ($ 1.4 billion) takeover offer for the society.

Despite lingering concerns about rising inflation, the STOXX 600 was on track to post a 2.6% rise in May, as economies gradually reopened after lockdowns and central banks reiterated their support to help recovery.

The accommodating comments from policymakers at the European Central Bank (ECB), including President Christine Lagarde, who said it was too early to discuss the slowdown in its purchases of emergency bonds in the event of a pandemic (PEPP ), helped prop up sentiment last week.

All eyes will be on Eurozone inflation figures as well as US employment data this week as investors attempt to gauge the trajectory of monetary policy ahead of Federal Reserve meetings and the ECB in early June.

“As members of the ECB recently pointed out, the rise in inflation is likely to be temporary and due to a number of technical factors rather than a real strength in underlying demand,” said UniCredit analysts wrote in a note.

“We agree with this point of view and expect inflation in the euro area to peak in Q4 and then fall back to the 1.5% area (or around 1% for sub-inflation. underlying). “

Among other individual movers, Swedish online real estate listing company Hemnet rose 3.6% after posting a 24% jump in quarterly sales, helped by demand for larger apartments and houses. (Reporting by Sruthi Shankar in Bengaluru; Editing by Sriraj Kalluvila)

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