European shares rise with earnings in focus; tariff worries prevail

Updates to market close

By Nikhil Sharma and Johann M Cherian

Feb 4 (Reuters) - European shares edged higher on Tuesday, as investors shifted their focus to quarterly earnings reports from companies such as UBS, BNP Paribas and Ferrari among others, while caution prevailed about potential U.S. tariffs.

The pan-European STOXX 600 index .STOXX closed a choppy session up 0.3%.

Automobiles .SXAP led sectoral gains, with sports car maker Ferrari RACE.MI up 8% after it said its revenue and core earnings would rise by at least 5% this year.

The financial Services sector .SXFP dropped 1%, dragged down by a 7% fall in UBS Group UBSG.S after CEO Sergio Ermotti said higher capital requirements in Switzerland would hurt shareholder returns. The Swiss lender had posted an upbeat fourth-quarter profit.

Embracer EMBRACb.ST shares sank 41.5%, the worst performer on the STOXX ahead of the gaming group's spin-off by tabletop game publisher Asmodee.

German chipmaker Infineon IFXGn.DE rose 10.4%, the index's best performer, after beating first-quarter revenue estimates and slightly raising its full-year revenue outlook.

"(Infineon's) results show the impact of soft end-markets driven by inventory reduction efforts," said Jan Frederik Slijkerman, senior sector strategist, TMT at ING.

"Although the reduction of inventories should come to an end in the coming quarters, Infineon looks somewhat at risk from a potential trade dispute, although it has local production in the (U.S.) as well."

The STOXX index posted its steepest daily decline so far this year on Monday after U.S. President Donald Trump said he would announce tariffs on top trade partners and impose surcharges on imports from the European Union soon.

Trump then agreed to a 30-day pause before implementing 25% tariffs on Mexico and Canada. However, China announced tariffs on some U.S. imports, starting from Feb. 10, in retaliation for Washington's 10% additional levies on Beijing.

EU trade chief Maros Sefcovic said the currency union wants to engage swiftly with the United States over Trump's planned tariffs.

Diageo DGE.L fell 1.6% after the world's top spirits maker withdrew its medium-term organic sales growth target as it took steps to try and mitigate the impact of U.S. tariffs on its tequila and Canadian whisky.

France's BNP Paribas BNPP.PA rose 4.2% after a forecast-beating jump in net income in the fourth quarter, aiding the banking sector's .SX7E 1.6% rise.

Vodafone dropped 7% after the mobile group reported another deterioration in Germany in its third quarter.

France's CAC 40 index .FCHI ended up 0.6%. Investors monitored developments surrounding the 2025 budget bill.