European shares at lowest in nearly two weeks as Trump's auto tariff dents sentiment

By Medha Singh and Nikhil Sharma

March 27 (Reuters) - European shares ended at their lowest in nearly two weeks on Thursday, dragged by auto stocks after U.S. President Donald Trump announced 25% import tariffs on all vehicles and foreign-made auto parts, exacerbating fears of a global slowdown.

The pan-European STOXX 600 .STOXX closed 0.5% lower, having dipped as much as 1.1%. The blue-chip index for Germany .GDAXI, among the biggest suppliers of car and car parts to the United States, fell 0.7%.

Volkswagen VOWG.DE, Europe's top carmaker, fell 1.5%. Chrysler-parent Stellantis STLAM.MI slumped 4.2%, BMW BMWG.DE fell 2.5% and Porsche P911_p.DE slid 2.6%.

French automotive supplier Valeo VLOF.PA sank 7.8%, saying it would not be able to absorb recent tariffs and would have to raise prices.

The STOXX 600 autos sector .SXAP slumped 1%, erasing all of its gains so far this year.

The new levies, set to take effect on April 3, could increase the cost of an average U.S. vehicle by thousands of dollars, given the intertwined supply chains across North America.

The announcement compounded investors' worries as they also braced for Trump's reciprocal tariffs on trade partners, due on April 2.

"The U.S. tariff story is not only a negative for the global economy, but for European equities," said Roland Kaloyan, European equity strategist at Societe Generale.

Washington has told the European Union it should not expect any trade negotiations before the United States has imposed more tariffs on the bloc next week, EU diplomats said .

The constant back-and-forth around U.S. trade policies dented investor sentiment around the globe.

But the STOXX 600 index is still set for its strongest quarterly performance in two years, on the back of hopes of an economic boost from Germany's historic fiscal spending plans and a rotation out of U.S. stocks.

The basic resources index .SXPP led Thursday's losses, tumbling 1.8%, tracking a drop in copper prices. MET/L

But real estate stocks .SXRP surged 2.1% as shorter-dated euro zone bond yields dipped following Trump's auto tariff announcement.

Germany's 2-year bond yield DE2YT=RR was down about 5 basis points to 2.069%, its lowest since March 3.

Among individual stocks, Swedish banks Handelsbanken SHBa.ST and Swedbank SWEDa.ST tumbled 12.4% and 8%, respectively, as both traded ex-dividend. The two were the biggest individual decliners on the main index.

ProSiebenSat.1 PSMGn.DE dropped nearly 10.1% after MFE MFEB.MI made a low-ball bid for shares in the German media group it does not already own.