Europe midday: Shares lower on hawkish Fed as regional rates stay put

(Sharecast News) - European shares were lower on Thursday as hawkish sentiment from the US Federal Reserve offset optimism over the signing of a memorandum of understanding between Iran and Washington.

The pan-regional Stoxx 600 index was down 0.53% to 634 at 1203 BST, despite the central bank holding interest rates unchanged as expected.

US shares had closed lower overnight after new Fed chair Kevin Warsh held his first news conference and confirmed projections that interest-rate forecasts had been revised upwards for the next three years.

The so-called dot plot graph showed that nine of the Fed's 18 policymakers expecting at least one rate hike before the end of 2026 - though Warsh abstained from submitting a projection. Back in March, at the onset of the energy crisis caused by the Iran war, no Fed participants expected a hike.

Meanwhile, US President Donald Trump signed a 14-point initial peace agreement with Tehran ahead of further talks, hailing it as a "major win" for his country despite making large political and financial concessions in order to get the vital Strait of Hormuz open again.

The deal includes an immediate lifting of a US naval blockade on Iranian ports, waivers for Iranian crude oil to be shipped abroad, the potential lifting of all international sanctions against Tehran, the unfreezing of Iranian assets worth billion and plans to develop a $300bn reconstruction fund for Iran funded by regional partners in the Gulf.

Oil prices pared earlier losses on the news, with Brent crude down 1.13% to $78.65 a barrel and West Texas Intermediate 1.72% to $75.47.

However, Iran said it would start charging fees for ships to pass through the strait once the MoU period expired - a situation that didn't exist before the US and Israel started their war of choice on Iran and Lebanon.

On the economics front, Norway's central bank left its interest rate unchanged at 4.25%, as expected, but signalled that rate hikes could be on the cards.

The Swiss National Bank also left interest rates unchanged at 0% in line with forecast, on a benign inflationary outlook, although it acknowledged that inflation had risen in recent months, coming in at 0.6% in May compared to 0.1% in February, due to higher energy prices.

Completing the week's rate decisions, the Bank of England also maintained rates at 3.75%.

In equity news, shares in Edenred surged on a report on French publication La Lettre that private equity fund BC Partners is considering taking control of the meal voucher provider.

BC Partners first wants to partner with a financial firm. Four funds have been approached, including the Canadian firm PSP Investments, to form a consortium, the report stated.

Reporting by Frank Prenesti for Sharecast.com