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UPDATE 2-European stocks fall from record but post fourth monthly gain

* STOXX 600 registers gain of 2.1% in May

* Deutsche Bank slides on report of Fed warning

* Trading volumes light as major markets closed (Adds comments, updates prices throughout)

May 31 (Reuters) - European stocks slipped from record highs on Monday in subdued trading due to holidays in major markets, but optimism over a swift economic recovery helped the STOXX 600 index mark its fourth straight month of gains.

The pan-European index was down 0.5%, with shares in Frankfurt and Paris dropping 0.6%, each.

UK and U.S. markets were closed for a holiday, keeping trading volumes muted across the board.

Among the top decliners was Deutsche Bank, down 1.3% after the Wall Street Journal reported that the U.S. Federal Reserve told the German lender it was failing to address persistent shortcomings in its anti-money-laundering controls.

Italian insurer Cattolica surged 15.1% after bigger rival Assicurazioni Generali said it would launch a 1.17 billion euros ($1.4 billion) buyout offer for the company.

Despite lingering worries about rising inflation, the STOXX 600 posted a 2.1% rise in May as economies gradually reopened after lockdowns and central banks reiterated support to aid the recovery.

Dovish comments from European Central Bank (ECB) policymakers, including President Christine Lagarde who said it was too early to discuss slowing its pandemic emergency bond purchases (PEPP), helped support sentiment last week.

Data showed German annual consumer price inflation accelerated in May, advancing further above the European Central Bank’s target of close to but below 2%.

“With headline inflation on the rise, the ECB’s attempt to avoid the taper conversation will become more and more complicated,” said Carsten Brzeski, global head of macro at ING said in a client note.

“However, we think German headline inflation could eventually range between 3% and 4% in the second half of this year.”

Among other movers, Swedish online property listings firm Hemnet rose 2.7% after posting a 24% jump in quarterly sales, helped by demand for large apartments and houses. (Reporting by Sruthi Shankar and Shreyashi Sanyal in Bengaluru; Editing by Sriraj Kalluvila and Christina Fincher)

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