LONDON: European shares slipped from four-month highs on Tuesday as anxiety over potential tariffs on European car imports to the US dampened the optimistic mood over US-China trade talks.
At 0940 GMT, the STOXX 600 was down 0.4 percent while Germany's DAX held flat.
A new round of talks between the United States and China to resolve their trade war will take place in Washington on Tuesday.
Sentiment is however fragile in Europe.
A confidential US Commerce Department report sent to President Donald Trump over the weekend is widely expected to clear the way for him to threaten tariffs on imported autos, which would particularly hurt Germany.
"Europe could come more into focus in trade discussions going forward," Goldman Sachs strategists wrote.
"This could add further challenges to both the autos sector and (Germany's leading index) DAX in Europe, which have already underperformed materially", they added.
The banking sector fell 1.5 percent, the worst-performing, while autos slid 0.5 percent.
Italy was a weak spot, falling 0.8 percent as bank stocks suffered from rising bond yields after weak industrial data.
Results drove the biggest moves on the stock level.
Among those in the red was HSBC, which reported a disappointing annual profit as higher costs and a stocks rout chipped away at its trading businesses.
Bank of America Merrill Lynch downgraded its rating for the stock to 'neutral' following the release of its results, saying there is "limited upside" for the share price.
HSBC fell 4.5 percent and weighed on Standard Chartered which lost 3.6 percent.
Another big loser was Danish hearing-aid maker William Demant, down 7.5 percent after
HeidelbergCement on the other hand jumped 4.7 percent as it shrugged off concerns about trade wars and a disorderly Brexit to forecast higher demand for cement this year.
"Energy cost pressure is easing and problem markets, Indonesia in particular, are becoming less problematic," said Davy Research analysts.
"Today's update should reassure investors that the group is back on track."
Dental implant maker Straumann gained 4.9 percent after reporting its fastest sales growth in 13 years.
"Overall, the key drivers remained intact and we expect several launches in 2019 to support the continued momentum," said Jefferies analysts.
Among top gainers was Wirecard, up 3.9 percent in the second day of a rally after Germany's financial watchdog banned short selling of the stock due to volatility following reports in the Financial Times which are now the subject of an investigation by German authorities.
ProSiebensat.1 shares fell 4.5 percent after business monthly Manager Magazin reported two board members will leave the company shortly.
Pandora shares tumbled 2.7 percent after a "trading sell" note from Carnegie, among the top-ranked analysts covering the stock, while SEB also reinstated a "sell" on the stock, traders said.
"We argue that Pandora's charms/bracelet concept 'Moments' is drifting out of fashion," SEB analysts wrote.
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