FILE PHOTO: The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, August 5, 2025. REUTERS/staff/ File Photo

By Sruthi Shankar and Sukriti Gupta

(Reuters) -European shares closed lower on Monday, giving back Friday's gains on optimism around U.S. monetary policy easing, while JDE Peet's soared on a buyout deal.

European markets came under pressure following Friday's surge when U.S. Federal Reserve Chair Jerome Powell pointed to a possible interest rate cut next month, citing rising risks to the job market.

The pan-European STOXX 600 index closed 0.4% lower in its worst day in over three weeks but was about 1% away from record highs.

Germany's DAX dropped 0.4% and France's CAC 40 slid 1.6%. The UK market was closed for a public holiday.

"Powell didn't really change the narrative as much as the U.S. market portrayed, but Europe was definitely part of the global party on Friday," said Steve Sosnick, chief market analyst at Interactive Brokers, adding that investors were booking some profits on Monday.

Construction and materials stocks were the heaviest drags on the index, with Nibe Industrier down 7.9%.

Utilities logged their steepest decline in more than a month. Orsted plunged 16.4% to a record low after the U.S. halted the Danish company's Revolution Wind project off Rhode Island amid President Donald Trump's pushback on renewable energy investments.

Peers such as Vestas Wind, EDP Renovaveis and Siemens Energy also lost ground.

JDE Peet's touched a near three-year peak and was last up 17.5%, after Keurig Dr Pepper agreed a deal to buy the company for 15.7 billion euros ($18.4 billion) in cash.

Five sources told Reuters that the European Central Bank is likely to keep interest rates steady next month, but discussions about further cuts may resume in the autumn if the economy weakens.

The ECB left its key rate at 2%, bringing a year-long easing cycle to an end and leading investors to bet on a prolonged pause.

Sosnick said a pause was not necessarily a "bad thing" if an economy was holding up, since the ECB had aggressively cut rates over the last several months.

Puma SE surged 15.9% after Bloomberg reported that the holding company of France's Pinault family was weighing options for its 29% stake in the German sportswear maker, including sounding out potential buyers.

Argenx rose 4.3% after RBC started coverage with "outperform" on strong belief in its Vyvgart medicine.

Valneva slumped 22.2% after the U.S. drug regulator suspended the French drugmaker's licence for chikungunya vaccine Ixchiq with immediate effect.

This week, focus will be on U.S. AI darling Nvidia's quarterly report for signs its $4 trillion valuation is justified.

On the tariff front, Switzerland hoped to finalise a new business offer for Washington soon to escape Trump's 39% tariffs.

($1 = 0.8545 euros)

(Reporting by Sruthi Shankar, Purvi Agarwal and Sukriti Gupta in Bengaluru; Editing by Mrigank Dhaniwala, Rashmi Aich and Alison Williams)