Europe midday: Rally ends as Israel threatens Lebanon despite 'ceasefire'

(Sharecast News) - The morning rally on European stockmarkets fizzled out by midday on Thursday as Israel undermined a 'ceasefire' agreement with the Iran-backed Hezbollah militia within hours of signing it.

The pan-regional Stoxx 600 index was down 0.25% to 619 at 1153 BST having been up 0.37% in the morning. Major bourses were mixed with German's DAX and France's CAC 40 higher, but the UK's FTSE was down 0.87%.

Sentiment shifted when Israeli defence minister Israel Katz said the military would continue ground operations in southern Lebanon, just hours after officials from both sides agreed to implement a US-backed ceasefire to end hostilities.

Katz said the Israel Defence Forces (IDF) would not withdraw from southern Lebanon, including the recently occupied Beaufort Castle, and the hundreds of thousands of people forced to flee their homes will not be able to return.

"The IDF will, at this stage, continue its fire and ground operations, remain in the security zone in Lebanon up to the yellow line - including in the Beaufort area - and without the return of the population, while continuing to dismantle terrorist infrastructure on the ground," he said in a statement.

He added that the IDF retained the "freedom of action, with American backing, to strike in Beirut in response to fire on Israeli communities and territory".

The ceasefire was contingent on a complete cessation of fire from Hezbollah and evacuation of all its fighters from the area south of the Litani river in southern Lebanon, according to a joint statement released by Washington.

However, despite the joint commitment to a ceasefire, Israel carried out multiple drone strikes in the Nabatieh area of southern Lebanon on Thursday morning. The deal was also not ratified by Hezbollah itself, with Lebanese government conducting negotiations as it tries to break the militia's grip on the country.

Brent crude oil slipped below $97 with traders cautious on how long any ceasefire can hold while Israeli still maintains an occupation force in Lebanon and continues to bomb civilian infrastructure.

In economic news, eurozone retail sales declined in April after growing in March by the most in 19 months, according to data out on Thursday from Eurostat.

The volume of retail trade across the single-currency region was down 0.4% over the month, slightly worse than the 0.3% decline expected by economists.

However, figures for March were revised to show 0.8% growth during the month, its highest since August 2024 and a turnaround from last month's initial estimate which showed a 0.1% monthly drop.

On a quiet day for corporate news, shares in trading platform CMC Markets surged as the company said 2027 operating income would beat analyst forecasts.

Universal Music Group shares fell on after Bill Ackman's Pershing Square exited its �1.4bn stake in the company, just days after the world's largest music group rejected a takeover proposal from the hedge fund billionaire.

Reporting by Frank Prenesti for Sharecast.com