* STOXX 600 ends muted, tech stocks reverse gains

* Rheinmetall bottoms STOXX 600 after Germany scraps frigate

plan

* Segro ( SEGXF ) jumps after Prologis ( PLD ) takes buyout bid public

(Updates after markets close)

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 ( SEGXF ) climbing 17.4%. U.S.-based Prologis ( PLD ) took

its $16.6 billion bid for Segro ( SEGXF ) publicafter the warehouse

landlord rejected its bid. Segro ( SEGXF ) 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.