By Utkarsh Hathi, Johann M Cherian and Purvi Agarwal
June 24 (Reuters) - European shares were muted on Wednesday as investors assessed developments in the U.S.-Iran negotiations, while defence group Rheinmetall dropped after Germany scrapped a landmark frigate programme.
The pan-European STOXX 600 index closed 0.1% higher, while Germany's benchmark DAX index ended down 0.6%.
Rheinmetall dropped 18.7% 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%.
The broader aerospace & defence shares lost 0.8% and the industrials sector on the STOXX 600 fell 0.2%.
"You've 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% and 2.3% respectively, tracking a dip in metals and oil prices.
Conversely, the real estate sector rose 3%, with Segro climbing 17.4%. U.S.-based Prologis took its $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% after posting its biggest single-day drop in nearly five months in the previous session.
Chipmaker Infineon fell 1.2%, and chip-equipment suppliers BE Semiconductor and ASML dropped 1.3% and 0.5%, respectively.
Memory stocks in Asia rebounded on the day, but were mixed in the U.S. ahead of chipmaker Micron's quarterly earnings.
"The tech selloff is similar to the other short-term selloffs we've seen this year, which typically don't 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 U.S.-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.
(Reporting by Utkarsh Hathi, Johann M Cherian and Purvi Agarwal in Bengaluru; Editing by Mrigank Dhaniwala and Sahal Muhammed)
