STOXX 600 opens flat as investors weigh US-Iran talks and ECB outlook

European shares were muted at the open on Wednesday as investors assessed developments in US-Iran negotiations, monitored the outlook for central bank policy, and reacted to sector-specific moves across the region.

The pan-European STOXX 600 edged 0.02% lower to 634.50 points by 0715 GMT.

The benchmark reflected a cautious start to the day, with weakness in defence stocks offset by gains in real estate and a modest recovery in technology shares.

Investors weigh US-Iran developments

Market sentiment was shaped in part by developments surrounding a preliminary peace deal between Washington and Tehran.

Crude prices traded near $76 a barrel, hovering around levels last seen in early March, on hopes that oil tankers stranded in the Gulf would be able to move out of the Strait of Hormuz following an agreement between the two countries.

Even so, caution remained in the market as disagreement persisted over the key terms of the deal.

Investors continued to assess whether the apparent progress in negotiations would translate into a durable easing of tensions or remain vulnerable to setbacks.

The broader implications of the deal also extended beyond energy markets.

The tourism industry is hoping for a rebound later in the year, with more visitors expected to return to the Middle East and nearby destinations, including Cyprus and Türkiye.

Defence stocks drag on the benchmark

Within the STOXX 600, the aerospace and defence sector led losses, falling 1.7%.

German defence group Rheinmetall was among the biggest decliners, sliding 12.3% after a media report said Germany is set to scrap plans to build its biggest warship since World War II.

The report added that the country intends instead to buy eight smaller frigates from rival TKMS.

The report weighed heavily on Rheinmetall shares, while TKMS moved in the opposite direction.

Shares in TKMS jumped 8.7% as investors responded to the prospect of the revised procurement plan.

Real estate sector leads gains

Real estate stocks were the strongest performers on the benchmark, with the sector rising 2.4%.

Segro surged 17% after US-based Prologis made its $16.6 billion bid public.

The move came after the UK warehouse landlord rejected the proposal.

The sharp jump in Segro shares helped lift the broader property sector and provided one of the biggest positive contributions to the STOXX 600 in early trading.

Tech shares recover after previous selloff

Technology stocks also stabilised after a weak previous session.

The sector rose 0.3%, recovering some ground after suffering its biggest single-day drop in nearly five months in the prior session.

The rebound came as memory stocks in Asia recovered.

South Korean shares rallied 3.3%, offering support to European semiconductor-linked names.

Among individual stocks, Infineon rose 0.9%.

Chip-equipment suppliers BE Semiconductor and ASML both added 0.4%.

ECB path and eurozone data remain in focus

Alongside geopolitical developments, traders were also watching the expected path of monetary policy for major global central banks.

According to LSEG-compiled data, markets were pricing in another 25 basis point interest rate hike by the European Central Bank by year-end.

Fresh business activity data from the eurozone added another layer to the market narrative.

Business activity remained in contraction territory in June, but improved from the previous month, according to a key survey released on Tuesday.

The eurozone purchasing managers’ index, published by S&P Global, rose to 49.5 in June from 48.5 in May, marking a three-month high.

A reading above 50 signals growth, while a figure below 50 indicates contraction.

S&P chief business economist Chris Williamson said the eurozone economy continued to show resilience despite remaining under pressure.

“The eurozone economy is showing enough resilience to just about stay out of recession,” Williamson said in a note.

“The flash PMI registered only a slight drop in business activity in June, meaning the survey is indicative of unchanged GDP over the second quarter,” he added.

Taken together, the market moves pointed to a cautious but selective tone in European trading.

Investors balanced optimism around a possible easing in Middle East tensions with uncertainty over the durability of that progress, while also digesting corporate developments and signals from economic data.