European shares close lower as investors weigh Middle East risks (updated)

AstraZeneca

Tue 10:01

STOXX down 0.5%
Ericsson, Nokia fall after reports on Nvidia 6G push
Italian lenders in spotlight
Updates with closing levels
By Utkarsh    Hathi, Johann M Cherian and Ragini Mathur

    June 9 (Reuters) - European shares surrendered early gains on Tuesday to close lower for a third straight session, led by declines in commodity-linked stocks as investors weighed a fragile Iran-Israel ceasefire. 
The pan-European index STOXX 600 .STOXX edged down 0.5% to 618.64 points, with miners .SXPP and energy stocks .SXEP leading losses, down 2.5% and 2.4%, respectively.
Sentiment around the Middle East conflict remained cautious. U.S. Energy Secretary Chris Wright said ship traffic through the Strait of Hormuz, a key global energy route, was rising "very meaningfully". 
Hopes for a durable easing in tensions were tempered after Israel struck the historic port city of Tyre in southern Lebanon on Tuesday, killing at least eight people. Tehran had warned on Monday it would resume hostilities if Israel continued attacks on its ally Hezbollah in Lebanon.
"The markets have been moving in a holding pattern for the last week or two, with what's happening in the Middle East and smaller impact from some of the AI driven volatility that we're seeing in Asian and U.S. markets," said Craig Cameron, portfolio manager at Franklin Templeton.

LENDERS JOSTLE FOR MARKET SHARE
European technology stocks .SX8P, which have seen bouts of volatility recently, showed signs of steadying earlier in the session but ended 1.3% lower, tracking Wall Street peers. 
Even so, the sector remains set for the strongest quarterly gain on the STOXX 600.
In corporate moves, Italy's financial sector stayed in focus after Monte dei Paschi di Siena BMPS.MI received rival buyout proposals from Intesa Sanpaolo ISP.MI and Banco BPM BAMI.MI, as lenders jostle for market share in the euro zone banking sector. 
Intesa also unveiled a separate plan to sell 635 MPS branches and the brand to insurer Unipol UNPI.MI, a move aimed at easing competition concerns.
MPS gained 2.6%, while Banco BPM and Intesa rose about 1% each. BPER Banca EMII.MI and Unipol advanced 4.7% and 2.9%, respectively.

ECB ACTION
The European Central Bank is widely expected to raise interest rates by 25 basis points on Thursday as inflation worries persist, though investors will be watching closely for guidance on how much further policymakers may go.
"It looks likely that the ECB will act, but it certainly won't want to over-egg the pudding. It won't want to make policy decisions that are too tight and risk dampening growth further," said Susannah Streeter, chief investment strategist at Wealth Club. "The outlook is probably going to be one of 'let's wait and see now'."
Among other sectors, telecoms .SXKP fell 2%, with Ericsson ERICb.ST and Nokia NOKIA.HE among the STOXX 600's biggest decliners after traders cited a report warning of potential risks from Nvidia NVDA.O developing technology for future mobile networks.
Defence stocks .SXPARO dropped 0.7% after Morgan Stanley downgraded European defence shares to equal-weight for the first time in more than two years, citing downward earnings revisions.

 (Reporting by Utkarsh Hathi, Johann M Cherian and Ragini Mathur in Bengaluru; Editing by Janane Venkatraman and Alison Williams)
 ((utkarshtushar.hathi@thomsonreuters.com))