Europe midday: Trump tariff talk hits auto shares as Stoxx in the red

(Sharecast News) - European shares were lower on Tuesday, with the auto sector in focus after US President-elect Donald Trump promised to hit China, Canada and Mexico with big tariffs.

The pan-regional Stoxx 600 index was down 0.3% to 507 points with all major continental bourses lower.

"European equity markets braced for a sharp drop on Tuesday as Trump's tariff threats against China, Mexico, and Canada sent shockwaves through global sentiment," said Matt Britzman, senior equity analyst at Hargreaves Lansdown.

"The President-elect's scorched-earth approach has stoked fears of a trade war, with investors increasingly wary that Europe could be next in his crosshairs."

Shares in Stellantis, Volvo, Volkswagen, BMW and Daimler Truck were all down, while French car parts maker Valeo also declined.

Trump on Monday said he would impose wide-ranging tariffs on goods from the trio, with China quickly warning that "no one will win a trade war".

"On January 20th, as one of my many first Executive Orders, I will sign all necessary documents to charge Mexico and Canada a 25 percent tariff on ALL products coming into the United States," Trump wrote in a social media post.

He also said China would face an extra 10% "above any additional Tariffs", in response to what he said was its failure to tackle fentanyl smuggling.

In other equity news, Melrose Industries surged as JPMorgan Cazenove hiked its price target on the shares to 850p from 650p and placed them on "positive catalyst watch" ahead of full-year results in March.

Shares in Swiss duty-free retailer Avolta fell after Barclays downgraded the stock to 'underweight' from 'overweight'.

Reporting by Frank Prenesti for Sharecast.com