European shares drop after strong rally

The pan-European STOXX 600 index was down 0.2 per cent ​at 612.06 points

European shares edged lower on Thursday, taking a breather after ‌their strongest rally in more than four years, as investors grew cautious about the durability of the fragile U.S.-Iran ceasefire and its implications on oil prices ​and global inflation.

The pan-European STOXX 600 index was down 0.2 per cent ​at 612.06 points, as of 0715 GMT.

Bourses were mixed, ⁠with Germany’s DAX down 0.5 per cent, while London’s FTSE 100 jumped ​0.2 per cent.

European markets surged on Wednesday on news of a two-week ceasefire agreement ​in the Middle East, sparking optimism that oil and gas shipments through the strategically crucial Strait of Hormuz might soon resume normal operations.

However, that optimism faded quickly ​as attacks continued on Wednesday, prompting Iran ​to warn it would be “unreasonable” to pursue permanent peace negotiations under such circumstances.

Meanwhile, ‌U.S. ⁠President Donald Trump warned of escalation in fighting if Iran failed to comply.

On STOXX 600, the industrial sector losses weighed the most, down 0.6 per cent.

While, travel, banks and technology stocks all traded in red.

On the ​flip side, the ​energy sector led ⁠the gains with 1 per cent rise, as oil prices rose on the day.

Despite the ceasefire, oil prices remain ​around 40 per cent above pre-war levels, raising concerns that an ​inflationary ⁠surge will soon be reflected in economic data. U.S. investors are now awaiting the release of Personal Consumption Expenditures (PCE) data later in the day ⁠for ​further insights into inflation trends.

Among other movers, ​British American Tobacco rose nearly 1 per cent after the Dunhill cigarettes maker named Dragos Constantinescu as its ​chief financial officer.