European shares end higher as markets await Iran deal details, Fed policy; BMW slides

European shares rose 0.5% on Wednesday, driven by gains in heavyweight banks, but auto stocks fell 3.3% after BMW cut its annual forecast due to weak Chinese market and US-Iran tensions.

European shares inched higher 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 closed 0.5% higher, in its fifth session of gains. However, auto stocks declined the most, down 3.3%, their biggest one-day fall in nearly a month. BMW lost 8.3% 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. 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%. They also logged their fifth session of gains, their longest streak since early January. Tech stocks climbed 1.5% with Aixtron ⁠up 6.7% and ​BE Semiconductor and ASML adding about 4% ⁠each. Defence stocks were up 0.5%.

Global investors remained cautious ahead of the signing of a peace deal between the U.S. 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 U.S. 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. 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.

"Investors will have to get used to the new Fed Chair's communication style, which is an adjustment period for markets... Warsh is likely going to take his time and ⁠monitor how inflation responds to the recent drop in oil prices," said James Demmert, chief investment officer, Main Street Research. Among stocks, dental implants maker Straumann jumped ⁠10.8% to top the STOXX 600 ⁠after sharply raising its 2026 profit outlook, citing stronger execution, rising earnings in China and lower tariffs.

Online used-car retailer Auto1 climbed 8.4% after announcing long-term guidance. Orange slipped 3.3% after Barclays reinstated coverage at "equal weight", saying value creation is ‌likely to take time.