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European Markets Close Lower On Geopolitical Concerns

European markets ended lower on Friday as an escalation in tensions in the Middle East and uncertainty about near term direction after recent gains prompted investors to largely stay away on the sidelines.

Data showing euro area private sector to have expanded at the fastest pace in seven months in June helped limit losses.

The pan European Stoxx 600 ended down 0.36%. Among the major markets in Europe, the U.K. ended modestly lower with its benchmark FTSE 100 declining 0.23%. Germany's DAX and France's CAC 40 both ended lower by 0.13%. Switzerland's SMI settled with a more pronounced loss of 0.56%.

Austria, Belgium, Czech Republic, Denmark, Ireland, Netherlands, Poland, Russia and Turkey ended lower.

Norway, Greece, Iceland, Italy, Portugal, Spain and Sweden closed on a positive note.

Shares of British semiconductor manufacturer IQE plunged more than 25% after the company said it will see a larger impact than the previously guided risk related specifically to the U.S. ban on Huawei.

Among other losers in the U.K. market, Dixons Carphone declined more than 6%. Travis Perkins, Hikma Pharma, Rolls-Royce Holdings, Provident Financial and Flutter Entertainment lost 2.8 to 3.7%.

GlaxoSmithKline, Carnival, Intu Properties, AstraZeneca, Reckitt Benckiser, Intercontinental, WPP, Intertek and Barclays also ended notably lower.

Merck, Vonovia, Bayer and Fresenius, which lost between 1 and 2.3%, were the notable losers in the German market.

Deutsche Bank, Muench.Rueckvers, Continental, E.ON and Daimler closed notably higher.

In France, Publicis Groupe shares shed about 3%. Dassault Systemes ended 2.4% down. Vinci, Sodexo, STMicroElectronics and Essilor lost 1.2 to 1.7%.

Renault rallied 2.3%. Societe Generale, Air Liquide, Carrefour, Accor, Legrand, Technip, Total, Valeo, Peugeot and Schneider Electric gained 0.7 to 1.5%.

In economic news, the euro area private sector expanded at the fastest pace in seven months in June, as growth in the service sector offset the fall in manufacturing, flash survey data from IHS Markit showed Friday.

The composite output index rose to a 7-month high of 52.1 in June from 51.8 a month ago. Economists had forecast the score to rise marginally to 52.0.

The reading puts growth in the second quarter up slightly on that seen in the first quarter, yet still the second-lowest since the fourth quarter of 2014.

Germany's private sector growth remained unchanged in June, flash data from IHS Markit showed. The flash composite purchasing managers' index, or PMI, showed a reading of 52.6 in June, same as seen in May. Economists had forecast a reading of 52.5.

The flash manufacturing PMI rose to 45.4 in June from 44.3 in the previous month. Economists had forecast a score of 48.0.

The flash services PMI increased unexpectedly to 55.6 in June from 55.4 in the preceding month. Economists had forecast a reading of 55.3.

France's private sector grew at the fastest pace in seven months in June, with the composite output index rising more-than-expected to 52.9, from 51.2 in May. The reading was forecast to rise slightly to 51.3.

The solid expansion was driven by both the manufacturing and service sectors.

The services Purchasing Managers' Index improved to 53.1 in June from 51.5 a month ago. The expected score was 51.6.

At 52.0, the manufacturing PMI hit a 9-month high. Economists had forecast the reading to rise marginally to 50.9 from 50.6 in May.

The mood in the markets was cautious amid escalating tensions between the U.S. and Iran after Iran's Revolutionary Guard shot down an unmanned U.S. surveillance drone on Thursday.

President Donald Trump has revealed he was just ten minutes away from launching a retaliatory attack on Iran before calling off the strikes.

The Trump administration has claimed the drone was over international waters when it was shot down, although Iran's Revolutionary Guard has argued the drone was flying over Iranian territory.

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