By Johann M Cherian and Utkarsh Hathi
June 3 (Reuters) – European shares slipped on Wednesday as renewed Middle East hostilities and signs of strain in private markets spooked investors, while Zara owner Inditex gained after reporting a strong start to the summer.
The pan-European STOXX 600 index dipped 0.4% to 622.73 points by 0823 GMT.
Financial services led sectoral declines with a 1.7% drop, as Partners Group shed 17% after the Swiss private markets firm restricted redemptions in one of its “evergreen” private equity funds.
Investors fear that private credit and equity firms are overexposed to mid-sized companies, vulnerable to disruption from emerging artificial intelligence models.
These concerns have fuelled a wave of fund redemptions and, since late last year, have repeatedly triggered global selloffs.
“We don’t see systemic risk coming from private credit. We have seen some default rates increasing, but we are more cautious today than six months ago,” said Claudia Panseri, chief investment officer at UBS Global Wealth Management, adding that it is not the kind of concern that would have a huge impact on banks or investor assets.
Panseri said that the prolonged Middle East conflict is the bigger risk currently, and that the market has already priced in a broadly negative environment for the euro zone, excluding energy and IT.
Tensions in the Middle East escalated as the U.S. military said it thwarted Iranian missile attacks on Bahrain, Kuwait and other regional targets, sending Brent crude prices up 2%.
However, U.S. President Donald Trump’s comments that talks with Iran were ongoing kept losses in check.
Energy price-sensitive airlines such as easyJet lost 3%, Lufthansa slipped 0.5%, while auto stocks fell 1.4%.
Bucking the trend, Inditex jumped nearly 5.5% after the Spanish company reported a strong start to summer trading, defying recent concerns about inflation dampening consumer demand.
British discount retailer B&M European Value Retail rose 14.5% after reporting full-year adjusted core profit above estimates.
The broader retail sector climbed 2.8% and gained the most among sectors.
AkzoNobel shares fell 18.7% after Nippon Paint and Sherwin-Williams said that they had decided to terminate their efforts to jointly acquire the paint maker.
Investors anticipate the European Central Bank to hike interest rates by 25 basis points next week to combat inflation pressures, LSEG-compiled data showed.
Euro zone final services PMI and producer price data are due later in the day, alongside the U.S. ADP employment and ISM services reports.
(Reporting by Utkarsh Hathi and Johann M Cherian in Bengaluru; Editing by Sonia Cheema)
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