By Ragini Mathur and Twesha Dikshit April 9 (Reuters) - European shares retreated on Thursday, after their strongest rally in over four years, as investors remained wary about a fragile U.S.-Iran
European Shares Fall Amid US-Iran Ceasefire Concerns and Oil Price Impact
Market Reactions and Sector Performance
By Ragini Mathur and Twesha Dikshit
April 9 (Reuters) - European shares retreated on Thursday, after their strongest rally in over four years, as investors remained wary about a fragile U.S.-Iran ceasefire and its implications for oil prices and global inflation.
European Indices and Regional Performance
The pan-European STOXX 600 index was down 0.2% at 612.59 points, after paring earlier losses following reports Israel and Lebanon could start direct negotiations soon.
Major regional bourses were also lower, with Germany's DAX down 1.1%, while France's CAC 40 <.FCHI> fell 0.2%.
Background: Recent Rally and Ceasefire Developments
European markets rallied on Wednesday after U.S. President Donald Trump agreed to a two-week ceasefire, sparking optimism that oil and gas shipments through the crucial Strait of Hormuz might resume operations.
However, Israel continued military operations in Lebanon on Wednesday while Tehran did not lift its near-total blockade of the Strait leading to renewed concerns over the economic impact of the conflict.
Market Analyst Insights
"(Yesterday's) rebound was very overdone given the fact that it is still just the two-week ceasefire and today obviously there is concerns over the durability of that ceasefire and the key focus for the market remains the Strait of Hormuz," said Fiona Cincotta, senior market analyst at City Index.
"With or without a ceasefire, if the Strait remains closed, the economic impact of the conflict remains ... we're seeing the market price in this caution."
Sector-Specific Impacts
European markets have been under pressure since February when the conflict began, given the continent's heavy reliance on oil imports and vulnerability to an energy shock.
The industrial sector weighed the most, down 0.5%. Germany's Siemens dropped 2.1% while Airbus fell 2.5%.
Travel, banks and technology stocks all traded in the red, after logging strong gains in the previous session.
Technology and IT Sector
Software and IT stocks came under pressure tracking their Wall Street peers. German software maker SAP dropped 6.8%, hitting its lowest level since January 2024.
IT budget growth is set to slow to 2.6% over the next 12 months with macro uncertainty potentially leading to delays in big projects, according to Citi's quarterly survey of chief information officers.
Luxury and Energy Sectors
The luxury sector dropped 0.7% with heavyweight LVMH sliding 3%.
Conversely, the energy sector gained almost 2% as oil prices rose on the day.
Inflation, Central Bank Policy, and Trade Developments
Investors parsed official data that showed headline inflation in the U.S. picked up on a monthly basis. Economists expect the surge in energy prices amid Middle East tensions to show up globally within inflation figures.
Traders scaled back expectations for the European Central Bank to hike rates following Wednesday's ceasefire announcement, but still expect two quarter-point tightening moves before year-end.
Meanwhile, a European industry lobby group that includes alcoholic drink companies has asked India for an exemption from a 10% import duty on glass bottles and aluminum cans.
(Reporting by Ragini Mathur and Twesha Dikshit in Bengaluru; Editing by Rashmi Aich and Toby Chopra)
