European shares end higher as markets await Iran deal details

FRANKFURT: European shares inched higher on Wednesday as investors awaited details of the US-Iran peace agreement and the Federal Reserve’s policy outlook, while auto stocks fell after BMW cut its annual forecast.

The pan-European STOXX 600 index closed 0.5 percent higher, in its fifth session of gains.

However, auto stocks declined the most, down 3.3 percent, their biggest one-day fall in nearly a month. BMW lost 8.3 percent after the premium carmaker lowered its annual profit outlook due to weakness in the Chinese market and the impact of the US-Iran war.

“For the (auto) sector we continue to be underweight. The earnings story continues to be very challenged for the auto sector. The reason is broader and structural,” said Beata Manthey, an equity strategist at Citigroup.

Separately, a survey showed that German automotive suppliers expecting business conditions to worsen over the next year now outnumber the industry’s optimists.

Heavyweight banks supported the STOXX 600, advancing 1.9 percent. They also logged their fifth session of gains, their longest streak since early January.

Tech stocks climbed 1.5 percent with Aixtron up 6.7 percent and BE Semiconductor and ASML adding about 4 percent each. Defence stocks were up 0.5 percent.

Global investors remained cautious ahead of the signing of a peace deal between the US and Iran on Friday after President Donald Trump said the new agreement was not final and he could resume the war if he is unsatisfied.

The sharp drop in oil prices since the announcement of the deal lifted the benchmark STOXX 600 to record highs, but it still lags the US benchmark S&P 500.

Barclays was the latest brokerage to announce that it has closed its underweight position on European stocks and raised its target for the STOXX 600 to 670 points from 620.