European shares edge lower on Fed rate-hike bets

European shares edged lower on Thursday as investors increased bets on a Federal Reserve rate hike, despite easing oil prices and a potential peace agreement between the U.S. and Iran.

European shares edged lower on Thursday as investors increased bets on a Federal Reserve rate hike after policymakers struck a hawkish tone, though ‌easing oil prices helped temper inflation concerns.

The pan-European STOXX 600 index slipped 0.22% to 637.93 points by 0915 GMT, with basic resources leading declines, down 1.8%. An interim peace agreement between the U.S. and Iran to end the war and reopen the Strait of Hormuz - a key ‌global oil shipping route, has brought a relief for markets in recent days, with oil prices falling to early-March levels, trading ‌near $78 a barrel.

Energy price-sensitive airlines Lufthansa and Air France rose 1.7% and 3.1%, respectively. In the U.S., the Fed held rates steady on Wednesday, but nine policymakers projected one rate hike this year. Traders see a 49.5% chance of a September increase and expect rates to remain unchanged thereafter through year-end, per CME Group's FedWatch tool.

"While ⁠we ​see headline inflation remaining elevated over coming ⁠months, we do not see second round effects feeding into core inflation," Mohit Kumar, an economist at Jefferies said. "If oil prices remain contained, we do ⁠not see inflation expectations moving higher, hence our view of no change from the Fed over coming months."

The European Central Bank raised borrowing costs last ​week and traders anticipate another 25 basis point rate hike by year-end, according to LSEG-compiled data. Meanwhile, Edenred jumped 15% after ⁠a media report said Britain's BC Partners is weighing a takeover of the French voucher company. Generali rose 1.3% after a report that UniCredit is seeking to double its ⁠stake ​in the lender through Delfin, the Del Vecchio family holding company. UniCredit shares were up 0.3%. EQT has reached an agreement to acquire UK's Intertek for about £10.6 billion ($14.10 billion). Shares of EQT were down 1.5%. Among others, chipmakers Infineon and Aixtron gained 3.8% and 2.2%, respectively. ⁠Global tech shares in Asia surged and tech-heavy Nasdaq futures rose over 1.5% in the U.S.

Aircraft manufacturer Airbus rose 3.3% after Kepler upgraded ⁠the stock, while food retailer, ⁠Tesco slipped 2.7% after reporting a slowdown in first-quarter sales growth. The IMK economic institute said Germany's economy will grow less than previously expected. The Bank of England is due to announce its rate ‌verdict later this morning.