European shares drop after previous rally
The pan-European Stoxx 600 closed 1.1% lower after advancing more than 2% on Wednesday
European shares slid on Thursday after a sharp rally in the previous session, as investors assessed progress towards an Iran-US peace deal that pushed crude prices sharply lower.
The pan-European Stoxx 600 closed 1.1% lower after advancing more than 2% on Wednesday. Most regional bourses, including in France, Germany and Britain, also declined.
European energy stocks shed 2.5% as crude dipped below $100 a barrel. Shell slid 2.9% despite beating first-quarter profit estimates and raising its dividend by 5%.
Oil prices came under pressure as Iran and the US edged towards a temporary agreement to halt their war, sources and officials said. Teheran is reviewing a proposal that would stop the fighting but leave what the U.S. perceives as most contentious issues unresolved.
European equities have lagged global peers since the war began, with elevated energy costs from supply disruption following the closure of the Strait of Hormuz fuelling inflation fears and clouding growth prospects.
There are still no clear signs that a durable peace agreement is imminent, and the path to resolution – if and when it materialises – is unlikely to be linear in our view, said Tom Nelson, head of market strategy at Franklin Templeton Investment Solutions.
He said: Markets are forward-looking, but in this case, they may be looking through a level of uncertainty that remains materially unresolved.
On the earnings front, spirits group Campari dropped 14.5% after first-quarter revenue missed expectations. Peers Diageo and Pernod Ricard declined more than 2% each, while the beverages index shed 2.1%.
Defence stocks slid 2.7%, with Rheinmetall down 6.9% after the German group reported first-quarter results and said that it had submitted a bid to buy German Naval Yards Kiel.
Shares of Siemens Healthineers slipped 4.7% after the medical technology company cut its full-year outlook, citing structural changes in the Chinese market and higher inflation expectations.
Conversely, Persil maker Henkel advanced 3.3% after meeting first-quarter sales expectations.
On the macro front, eurozone financial integration has made steady progress in recent years but equity markets remain fragmented, the European Central Bank said in a report.