European equity markets were subdued at the start of trading on Wednesday as participants awaited clarity on two major catalysts: the terms of a prospective peace agreement between the United States and Iran and fresh signals from the Federal Reserve on the path for interest rates.
By 07:10 GMT the pan-European STOXX 600 index had risen 0.05% to 636.29 points. Sector performance was uneven, with autos at the back of the pack after carmaker BMW trimmed its full-year profit outlook.
Auto shares fell 2.3% overall, driven by a 7.3% slide in BMW stock after the premium automaker cited a slowdown in China and the consequences of the Iran war as reasons for lowering its annual earnings projection.
Meanwhile, a survey of Germany's automotive supplier base signaled a deteriorating near-term outlook for the sector. The survey found that suppliers anticipating worse business conditions over the next year now outnumber those expecting improvements. The study also noted that domestic hiring in the industry has fallen to a new low and that investment is shifting abroad.
Market attention remains fixed on developments surrounding a U.S.-Iran peace process. Global investors are on edge as negotiators have progressed to a preliminary agreement to end the conflict and a formal signing is scheduled for Friday. Since the announcement of the tentative deal, oil prices have dropped sharply, a move that has helped lift sentiment in broader markets and left the STOXX 600 trading close to record highs.
Institutional positioning has reflected the improved tone: Barclays recently said it had closed its underweight on European equities.
Later in the session, attention will turn to the Federal Reserve's policy decision and, in particular, remarks from new Chair Kevin Warsh about the outlook for interest rates and monetary policy more broadly.
On the individual company front, Italian defence group Leonardo saw its shares rise 1.7% after the Italian government granted conditional approval to a joint venture between the state-controlled company and Turkey's Baykar.
Market context
European stocks opened modestly higher overall, but the auto sector weighed on the broader index after BMW's earnings outlook revision and signs of stress among German suppliers. Geopolitical progress toward a U.S.-Iran deal and comments from the Fed's new chair are the dominant near-term drivers for markets.