LONDON, May 18 (Reuters) - European shares dropped in early deals on Thursday as political upheaval in Washington D.C. continued to weigh, though deal-making activity and earnings updates kept the region's outperformance against global peers intact.
The pan-European STOXX 600 <.STOXX. index was down 0.4 percent, while Germany's DAX retreated 0.3 percent and Britain's FTSE 100 fell 0.5 percent, extending Wednesday's losses after reports that U.S. President Donald Trump had interfered with an FBI probe, following a week of tumult at the White House.
Financials and commodity-related sectors, the biggest beneficiaries of the reflation trade that accelerated in the aftermath of Trump's election win were the biggest drags.
The more defensive utilities and personal & household goods sectors made small gains.
Some of the largest individual stock moves were spurred by fresh M&A action, with shares in Berendsen soaring nearly 27 percent after French laundry firm Elis made a $2.6 billion offer for the British rival.
Likewise shares in Swedish debt collector firm Intrum Justitia dropped more than 8 percent after it proposed a string of divestments in order to assuage European Commission concerns over its planned merger with Norwegian rival Lindorff.
Shares in Italy's Fiat Chrysler were also weaker after the U.S. Justice Department said that it was preparing to sue the carmaker over excess diesel emissions as early as this week.
On the positive side, earnings buoyed shares in Royal Mail , which gained around 3 percent after its first quarter results, while luxury goods firm Burberry also rose after its full-year update. (Reporting by Kit Rees, Editing by Vikram Subhedar)