Carmakers drive European shares lower after Trump’s tariff threats

FRANKFURT: European shares retreated from record highs on Thursday, with automakers leading declines as investors evaluated the impact of US President Donald Trump’s potential tariffs on the European Union.

The pan-European STOXX 600 index closed down 0.5%, after touching a record high on Wednesday.

An index of European autos and component makers fell more than 3.7%. Stellantis dropped 5.2%, BMW lost 3.8% and Porsche was down 3.3%.

Ferrari was the biggest drag, down 7.9%, after Exor sold a roughly 4% stake in the luxury automaker for 3 billion euros ($3.14 billion).

The European Commission said that it would react “firmly and immediately against unjustified barriers to free and fair trade”, in response to Trump’s tariffs.

“The first question is how real the threat is, because so far we’ve seen that he will use it as a bargaining tool,” said Yvan Mamalet, senior economist strategist at SG Kleinwort Hambros.

“The EU imports a lot of services from the US, in particular the tech giants, so it can show retaliation and that may help to avoid tariffs. Exports to the US are still a relatively small share of euro area GDP, so it’s kind of a moderate impact.”

Technology shares fell 2.2%, dragged by heavyweights SAP and ASML, after US AI bellwether Nvidia’s quarterly results failed to impress investors.

Most STOXX 600 sectors closed lower but energy shares were a bright spot, buoyed by rising oil prices.

Meanwhile, the European Central Bank’s system that handles $1.9 trillion a day in transactions across the region was suffering an outage which could delay settlement of payments.

A Reuters poll showed that the ECB was set to trim its deposit rate again to 2.5% next week.

Most regional stock bourses were also lower on the day. Britain’s FTSE 100 and Ireland’s ISEQ were outliers, with a 0.3% and 0.4% gain respectively. The FTSE 100 was boosted by a near 16% rise in Rolls-Royce, that hit a record high, after the British engine-maker lifted its mid-term targets and beat 2024 profit growth expectations.