European equities tick lower as failed US-Iran talks weigh on sentiment

By Ragini Mathur and Twesha ‌Dikshit

April 13 (Reuters) - European shares ​dipped ​on Monday as expectations of a swift resolution to the Middle East conflict dimmed following the breakdown nL6N40V09S of U.S.-Iran negotiations and Washington's decision to impose ‌a blockade nL6N40V09S around the Strait of Hormuz.

The pan-European index was down 0.2% ⁠at 613.88 points, with the benchmark closer to its pre-war levels than the mid-March lows.

Major regional bourses were ‌also lower, with Germany's DAX and ‌Spain's IBEX 35 falling 0.3% and 1%, respectively.

The deadline for the start of a U.S. military blockade passed, while Tehran threatened to retaliate against ports of its Gulf neighbours, ​if Iranian ports were threatened.

Rising tensions pushed oil prices above the $100-per-barrel mark, adding to inflation worries that have remained on the forefront since the conflict began. [O/R]

"The absence of progress ⁠in US-Iran talks over the weekend has challenged market optimism. This reinforces our view that investors should mitigate risks through diversification ​and hedging," UBS analysts said.

"We continue to recommend staying invested, as we believe both parties are incentivized to find a resolution."

Monday's downturn follows a ​rally last week, when the STOXX 600 gained 3% ‌on investor optimism that a temporary U.S.-Iran ceasefire could lead to end of hostilities.

Financial shares added 1.2%. British fintech firm Wise rose 6.5% after ⁠nL6N40W0C6 its quarterly cross-border volumes surged ahead of its Nasdaq debut.

The aerospace & defense index was higher after coming under pressure last week. Germany's Rheinmetall and UK's BAE Systems were up over 2% each.

Communication services <.SXKP> and ⁠healthcare <.SXDP> weighed heavily on the benchmark index. Shares of Deutsche Telekom fell 6% after hitting an over two-month ​low earlier after JP Morgan trimmed the German firm's price target.

French luxury giant LVMH said nL6N40Q0W6 it suffered a heavy impact from the Middle Eastern conflict, with sales falling in the Gulf. Shares were marginally ‌lower.

On the monetary policy front, markets are currently pricing in nearly three 25-basis-point rate increases from the European Central Bank by year-end, according ‌to LSEG-compiled data.

Among other movers, Nokia soared 7.2% to its highest in 16 years, aiding tech shares, ⁠with traders citing a BofA rating upgrade ‌to buy.

Investor attention will now ​shift toward earnings season, with U.S. banks kicking-off by reporting quarterly results this week.

(Reporting by Ragini Mathur and Twesha Dikshit; Editing by Sherry Jacob-Phillips and ‌Shailesh Kuber)

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