European shares held back by weak German data

EDINBURGH, July 7 (Reuters) - European shares fell on Monday after weak data out of Germany took the wind out of a rally that saw a top index post its best week in over three months.

German industrial output fell 1.8 percent on the month in May, its biggest drop in more than 2 years, confounding expectations of unchanged industrial output in Europe's powerhouse.

"It's just more evidence that overall economic growth has slowed down in the second quarter from the strong first quarter," Ioan Smith, director at KCG, said.

The German DAX fell 0.3 percent in early deals, a top faller in Europe along with the French CAC down 0.4 percent after pharmaceutical heavyweight Sanofi (NasdaqGM: GCVRZ - news) warned that currency effects would impact earnings, shaving over 4 points off the index.

The pan-European FTSEurofirst 300 was down 0.1 percent to 1,392.31, having gained 1.7 percent last week, its biggest weekly rise since March. (Reporting by Alistair Smout; Edited by Lionel Laurent)