European shares muted at start of holiday-shortened week

Updates after market close

By Ragini Mathur, Purvi Agarwal and Twesha Dikshit

Dec 22 (Reuters) - European shares were little changed on Monday, with beverage stocks weighing on the index, as investors navigated a holiday-shortened week on a tepid note after a record close in the previous session.

The pan-European STOXX 600 .STOXX ended down 0.09% at 586.99. Major regional bourses were also lower, with London .FTSE and France .FCHI down 0.3% and 0.4%, respectively.

The STOXX 600 gained more than 1% last week after a slowdown in U.S. consumer price inflation bolstered expectations for additional Federal Reserve interest rate cuts, while the European Central Bank maintained its current policy rates and took a more positive view of the euro zone economy.

Analysts expect some volatility in markets, driven by low liquidity heading into a holiday-shortened trading week.

"I think what we're seeing is a year-end positioning out of consumer, noncyclicals and also utilities and healthcare ...

and there seems to be a repatriation of funds going on into technology but in the U.S.," said Axel Rudolph, senior financial analyst at IG.

"Everybody seems to be focusing now on the festive period. There's far less liquidity, there's less volume trade."

Most sectors retreated following the robust gains on Friday, with the food and beverages category dropping the most. Shares of Diageo DGE.L, the world's largest spirits group, fell 3.7% while those of French spirits maker Pernod Ricard PERP.PA and Stella Artois owner Anheuser-Busch InBev ABI.BR were down 2.9% and 2.5%, respectively.

China's commerce ministry has imposed anti-dumping measures on imports from the European Union, further straining tensions between Beijing and the bloc. The EU has imposed tariffs on China-made electric vehicles.

STOXX 600 POISED FOR BEST ANNUAL PERFORMANCE SINCE 2021

Commodity-linked sectors traded higher, with miners .SXPP up almost 1% after gold prices raced past $4,400 per ounce for the first time and copper prices set a record high.

Shares of banks .SX7P, which largely drove last week's gains, were little changed. The sector is up more than 65% on a year-to-date basis - it is one of the market's strongest performers - with analysts pointing to a pickup in merger-and-acquisition activity, lighter regulatory backdrop, and relatively stable economic environment.

The defence and aerospace .SXPARO sector retreated 0.4% after rising more than 3% in the previous two sessions.

"We anticipate positive macroeconomic momentum in the euro zone will persist, and corporate profit growth to pick up... we particularly like banks, utilities, industrials, technology and Germany," UBS Global Wealth Management analysts said.

Shares of oil firms .SXEP gained 0.3%, tracking a rise in crude prices.

The STOXX 600 index is poised to deliver its strongest annual performance since 2021, benefiting from declining interest rates and global investors diversifying their portfolios away from premium-valued U.S. technology stocks.

On the radar will be a U.S. GDP reading this week, one of the final economic indicators before the end of the year.

Among stocks, Abivax ABVX.PA jumped 15% after media reports of renewed chatter of U.S. pharmaceutical giant Eli Lilly LLY.N attempting a takeover.

Orsted ORSTED.CO fell more than 12% after the Trump administration suspended leases for five large-scale offshore wind projects under national security concerns. The Danish energy firm owned two of the affected projects.

(Reporting by Twesha Dikshit, Utkarsh Hathi, Ragini Mathur and Purvi Agarwal in Bengaluru; Editing by Harikrishnan Nair, Tasim Zahid and Paul Simao)

((Ragini.Mathur@thomsonreuters.com;))