European shares tread water as Iran uncertainty weighs, Rheinmetall slumps

[BENGALURU] European shares were muted on Wednesday (Jun 24) as investors assessed developments in the US-Iran negotiations, while defence group Rheinmetall dropped after Germany scrapped a landmark frigate programme.

The pan-European Stoxx 600 index closed 0.1 per cent higher, while Germany’s benchmark DAX index ended down 0.6 per cent.

Rheinmetall dropped 18.7 per cent and marked its biggest one-day drop on record after Germany scrapped plans to build six F126 frigates following delays and expected cost overruns, a contract the defence group was tipped to win.

Instead, Berlin will switch to smaller Meko A-200 frigates from Thyssenkrupp’s marine unit TKMS, which jumped 16 per cent.

The broader aerospace & defence shares lost 0.8 per cent and the industrials sector on the Stoxx 600 fell 0.2 per cent.

“You have got a very unstable environment and ongoing wars. That should feed into positive sentiment towards the defence sector, but it’s not happening,” said Michael Field, chief equity market strategist at Morningstar.

Commodity-linked sectors were the biggest decliners on the Stoxx 600; miners and energy stocks fell 2.5 per cent and 2.3 per cent respectively, tracking a dip in metals and oil prices.

Conversely, the real estate sector rose 3 per cent, with Segro climbing 17.4 per cent. US-based Prologis took its US$16.6 billion bid for Segro public after the warehouse landlord rejected its bid. Segro marked its biggest intraday jump since March 2009.

The tech sector reversed gains to fall 0.3 per cent after posting its biggest single-day drop in nearly five months in the previous session.

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European shares muted as investors assess US-Iran talks

Chipmaker Infineon fell 1.2 per cent, and chip-equipment suppliers BE Semiconductor and ASML dropped 1.3 per cent and 0.5 per cent, respectively.

Memory stocks in Asia rebounded on the day, but were mixed in the US ahead of chipmaker Micron’s quarterly earnings.

“The tech sell-off is similar to the other short-term sell-offs we have seen this year, which typically do not last longer than a few days,” said Jennifer Bender, global chief investment strategist at State Street Investment Management.

“As in the past, it involves markets with heavy retail presence and likely short-term traders taking profits.”

Brent crude has hit its lowest levels since the US-Israeli war on Iran started, as supply disruption concerns eased after a peace agreement. However, caution prevailed amid disagreement on the key terms.

On the data front, German business morale rose in June, with companies more positive about their current situation than they have been for nearly two years.

Traders were also watching for cues on the monetary policy path for major global central banks, as they priced in another 25-basis-point rate hike by the European Central Bank by year-end, according to LSEG-compiled data. REUTERS