European shares deepen fall on inflation worries

* UK inflation hits 40-year high

* Euro zone inflation still at record high

* Euronext surges on profit beat

* Commerzbank rises on reports of merger talks with UniCredit

* TUI slide on shares sales announcement

By Susan Mathew

May 18 (Reuters) - European shares slipped on Wednesday led by technology stocks as worries about inflation and monetary policy tightening dampened optimism around China's economic recovery, while shares of UniCredit and Commerzbank rose.

The pan-European STOXX 600 index .STOXX fell 1.1% after rising a little more than 3% since Friday.

Technology shares .SX8P slipped 2.7%, while a fall in copper prices weighed on basic material stocks .SXPP .

Data on Wednesday showed British consumer price inflation hit 9% in April, its highest level on record, inching closer to the Bank of England's prediction of above 10% later this year.

"Worries about recession reared up again after UK inflation jumped to the highest level in 40 years," said Susannah Streeter, senior investment and markets analyst at Hargreaves Landsdown.

Euro zone inflation held steady at a record high 7.4% in April, driven by soaring fuel and food costs, the EU's statistics agency said, lowering its estimate from a preliminary 7.5%.

The European Central Bank is set to hike rates shortly after ending its bond-buying programme early in the third quarter, with the potential for further hikes in coming quarters, echoing a strategy similar to the U.S. Federal Reserve.

"For the first time overnight index swaps were pricing in that the ECB would hike by more than 100bps by their December meeting," said Deutsche Bank strategist Jim Reid.

A rise in optimism on Tuesday, after falling COVID-19 cases in China drove hopes of more economic activity, proved short-lived.

The STOXX 600 is in on course to end lower in May, having marked gains only in March this year. But with a 11% decline year-to-date, the index has still fared better than the S&P 500 .SPX and MSCI's All Country index .MIWD00000PUS , which are down more than 14% over the same period.

In earnings, Euronext ENX.PA rose 3.9% on record quarterly revenue. Dutch bank ABN Amro ABNd.AS topped profit estimates but shares fell 11.9% as it warned about the impact of the war in Ukraine.

Siemens Gamesa SGREN.MC jumped 12.6%, after sources said Siemens Energy ENR1n.DE is preparing to buy the remaining stake in the wind turbine maker. The stake is worth 3.14 billion euros ($3.31 billion).

Germany's Commerzbank AG CBKG.DE rose 3.1%, while Italy's UniCredit SpA CRDI.MI gained 2% after a report spoke of scheduled merger talks before the potential deal was abandoned because of the Ukraine war.

Holiday group TUI TUIGn.DE tumbled 12.6% after it announced a share sale to repay elements of a German state bailout it received during the pandemic.
Reporting by Susan Mathew and Shreyashi Sanyal in Bengaluru; Editing by Rashmi Aich and Barbara Lewis

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