Europe close: Stocks finish lower ahead of US-Iran ceasefire deadline

(Sharecast News) - European equities reversed earlier gains to close lower on Tuesday, while oil prices pushed higher, as investors monitored the looming ceasefire deadline between the United States and Iran with little clarity over whether fresh peace talks would materialise.

As Axel Rudolph, chief technical analyst at IG, noted, "US indices dictate the pace as they resume their ascents while most European stocks slip despite reports of a second round of US-Iran negotiations".

The pan-European Stoxx 600 fell 0.87% to 616.03.

Germany's DAX declined 0.6% to 24,270.87, France's CAC 40 dropped 1.14% to 8,235.72, and London's FTSE 100 slid 1.05% to 10,498.09.

In commodities, Brent crude was last up 2.66% on ICE at $98.02 per barrel, while the NYMEX quote for West Texas Intermediate gained 4.49% to $93.63.

Danni Hewson, head of financial analysis at AJ Bell, said: "It's been another choppy day for London markets as investors have grappled with growing concerns about the fragile ceasefire in the Middle East along with domestic issues and economic data highlighting continued weakness in the UK economy,"

Sentiment remained fragile as uncertainty persisted around diplomatic efforts.

It was unclear whether Iran would send officials to Pakistan for a second round of talks after the US seized an Iranian-flagged cargo vessel on Monday, while Iranian state television indicated no delegation had yet departed.

US president Donald Trump continued to warn of renewed military action, saying it was "highly unlikely" the current ceasefire - due to expire on Wednesday - would be extended, even as officials from both sides were expected to meet in Islamabad.

"In contrast, European markets weakened amid deteriorating economic sentiment and heightened exposure to energy risks," Rudolph said.

"Germany's ZEW economic sentiment index fell sharply to its lowest level since December 2022, highlighting growing pessimism driven by the ongoing Middle East conflict and concerns over sustained energy shortages."

German investor sentiment deteriorates sharply

On the macroeconomic front, German investor sentiment deteriorated sharply in April.

The ZEW economic expectations index fell to -17.2 from -0.5 in March, well below forecasts of -5.0, while the current conditions index dropped to -73.7 from -62.9.

"Economic expectations are slipping into negative territory," said ZEW president Achim Wambach.

"The economic consequences of the Iran war for the German economy go far beyond price increases: businesses are concerned about long-term shortages of energy supply, and this discourages investment and weakens the effect of government stimuli."

In the UK, labour market data offered mixed signals.

The unemployment rate unexpectedly fell to 4.9% in the three months to February from 5.2%, while payrolled employment was broadly unchanged, reflecting weak hiring conditions.

Average earnings excluding bonuses rose 3.6%, down from 3.8% previously but slightly ahead of expectations, while total pay growth slowed to 3.8% from 4.1%.

Public sector pay rose 5.2%, compared with 3.2% in the private sector.

Hewson said it was "impossible to know" whether the decline marked a turning point, warning that the energy price shock linked to the Iran conflict could "push companies to rethink hiring intentions and potentially cut staff."

"Vacancies fell to their lowest level in almost five years, but with unemployment also falling, the number of vacancies per unemployed person remains broadly unchanged," added Liz McKeown, director of economic statistics at the Office for National Statistics.

Thales sinks, Royal Unibrew runs out of fizz

Among individual stocks, Denmark's Royal Unibrew plunged 24.82% after the brewer said it would end its partnership with PepsiCo in northern Europe.

France's Thales fell 5.92% despite reporting higher first-quarter orders, supported by defence demand as governments increased military spending in response to geopolitical tensions.

Reporting by Josh White for Sharecast.com.