FRANKFURT: European shares slipped on Thursday after a steep rally in the previous session, as investors assessed progress towards a US-Iran peace deal that pushed crude prices sharply lower.
The pan-European STOXX 600 ended 1.1 percent lower after rising more than 2 percent on Wednesday. Most regional bourses, including in France, Germany and Britain , also fell.
European energy stocks dropped 2.5 percent as crude fell below USD100 a barrel. Shell lost 2.9 percent despite beating first-quarter profit estimates and raising its dividend by 5 percent.
Oil prices came under pressure as the US and Iran edged towards a temporary agreement to halt their war, sources and officials said. Tehran is reviewing a proposal that would stop the fighting but leave the most contentious issues unresolved.
European equities have lagged global peers since the conflict 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.
“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 tumbled 14.5 percent after first-quarter revenue missed expectations. Peers Diageo and Pernod Ricard fell more than 2 percent each, while the beverages index dropped 2.1 percent.
Defence stocks shed 2.7 percent, with Rheinmetall down 6.9 percent after the German group reported first-quarter results and said it had submitted a bid to buy German Naval Yards Kiel.
Shares of Siemens Healthineers fell 4.7 percent 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 rose 3.3 percent after meeting first-quarter sales expectations.
On the macro front, euro zone financial integration has made steady progress in recent years but equity markets remain fragmented, the European Central Bank said in a report.
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