European shares were muted on Wednesday as investors awaited details of the U.S.-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 (.STOXX) was flat at 635.87 points by 0835 GMT.
Auto stocks (.SXAP) declined the most, down 2.3%, dragged by a 6.3% slide in BMW (BMWG.DE) after the premium carmaker lowered its annual profit outlook due to weakness in the Chinese market and the impact of the U.S.-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.
Tech stocks (.SX8P) supported the STOXX index, with Aixtron (AIXGn.DE) up 4.6% and BE Semiconductor (BESI.AS) and ASML (ASML.AS) adding 1% each. Defence stocks (.SXPARO) also advanced 1%.
Global investors remain cautious ahead of the signing of a peace deal between the U.S. and Iran on Friday after the countries signed a preliminary agreement to end the conflict.
The sharp drop in oil prices since then has lifted global sentiment, with the benchmark STOXX 600 trading near an all-time high touched on Monday.
"For us to turn more constructive, we really need to see reasons for earnings from here being upgraded. If oil stays low or goes even lower, then of course on the margin it will be helpful. But is it enough remains to be seen," Citigroup's Manthey said.
The brokerage also upgraded the luxury sector (.STXLUXP), which has fallen the most among STOXX 600 sectors, to "overweight".
Dental implants maker Straumann (STMN.S) jumped 9% after sharply raising its 2026 profit outlook, citing stronger execution, rising earnings in China and lower tariffs.
Attention will shift to the Fed's monetary policy decision later in the day. While interest rates are expected to remain unchanged, focus will be on the new Chair Kevin Warsh's comments.
Among other stocks, Orange (ORAN.PA) slipped 3.7% after Barclays reinstated coverage at "equal weight", saying value creation is likely to take time.
Online used-car retailer Auto1 (AG1G.DE) climbed 8.6% after announcing long-term guidance.
