By Susan Mathew and Bansari Mayur Kamdar

(Reuters) -European stocks pared some session gains on Monday, after a report said Russia’s Gazprom had declared force majeure on gas supplies to Europe to at least one major customer.

The pan-European STOXX 600 index, which had risen as much as 1.5% to hit three-week peaks earlier in the session, cut gains to 1% by 1308 GMT. Germany’s DAX moved closer to session lows, last up 0.8%.

The letter seen by Reuters said Gazprom, which has a monopoly on Russian gas exports by pipeline, could not fulfil its supply obligations owing to “extraordinary” circumstances outside its control. A trading source said the letter concerned supplies through the Nord Stream 1 pipeline that brings gas to Germany.

Maintenance on Nord Stream 1 is scheduled to end on July 21 and investors had feared that Russia could stall the resumption of gas supply amid its war with Ukraine. This could result in a gas supply crunch in Europe and keep prices elevated for longer.

“Germany is going to find it tougher and have to pay more for energy and certain sections of their manufacturing industry and life in general will take a knock. If their economy takes a knock that will feed out to the wider eurozone,” said David Madden, market analyst at Equiti Capital.

Markets had enjoyed a upbeat session on easing fears about a 100-basis-point interest rate hike by the U.S. Federal Reserve this month, and hopes of fresh China stimulus amid COVID-19 flare-ups. [MKTS/GLOB][.SS]

Gains were broad-based and led by miners, banks and energy stocks.

The focus this week will also be on the European Central Bank, which is set to increase its key interest rate by 25 basis points on Thursday, and investors will look for clues on the pace and magnitude of future hikes amid record-high inflation.

The STOXX 600 has slipped about 15% from an all-time high hit in January, as worries about slowing growth in China, the world’s second-largest economy, aggressive central bank policy tightening globally and the fallout of the Russia-Ukraine war dented risk appetite.

In earnings-driven moves on Monday, Finland’s Nordea jumped 6.2% as a rise in earned loan interests boosted second-quarter operating earnings.

British insurers fell after Direct Line slipped 12.9% on a profit warning. Peers Admiral and Sabre Insurance Group lost 6.3% and 1.3%, respectively.

(Reporting by Susan Mathew in Bengaluru; Editing by Subhranshu Sahu and Shinjini Ganguli)