European shares ticked lower on Monday as European automakers came under pressure following threats of a U.S. tariff hike, while investors awaited signs of progress in reopening the Strait of Hormuz.
U.S. President Donald Trump said on Friday he would raise tariffs on cars and trucks from the European Union to 25% this week from the prior 15%, saying the bloc had not complied with its trade deal.
"The European car makers have been in the crossfire since the tariff discussion," said Ipek Ozkardeskaya, senior analyst at Swissquote bank.
"The European car makers are already under technology pressure, under competition pressure, especially in the EV sector from the Chinese names that are preparing to inundate the market. So it is more important for the European car companies to fare better in the United States."
German automakers led the fall, with BMW (BMWG.DE) and Mercedes (MBGn.DE) dropping about 2% each. Porsche (PSHG_p.DE) and Volkswagen (VOWG.DE) declined 0.9% each.
Truckmakers Daimler Truck (DTGGe.DE) and Traton (8TRA.DE) were both marginally down. Car parts supplier Continental (CONG.DE) fell 4.4%. The automobiles index (.SXAP) fell 1.1%.
The pan-European STOXX 600 (.STOXX) was down 0.2% to 610.35 points as of 0817 GMT, after posting a modest gain last week. Regional bourses were mixed, with Germany's DAX (.GDAXI) flat. London markets were closed for a public holiday.
European equities remain about 4% away from their pre-war trading levels, as the region's energy dependence still weighs on shares while Wall Street and global equities have rebounded on artificial intelligence-driven optimism.
Investors looked for signs of progress in reopening the vital Strait of Hormuz. Iran's military warned U.S. forces not to enter the Strait after Trump said Washington would help free ships stranded in the Gulf.
Technology shares (.SX8P) lifted the broader index, with AI optimism also advancing shares in Asia. Nokia (NOKIA.HE) jumped 6.3% to touch a 17-year high and German software maker SAP (SAPG.DE) added almost 2%.
Semiconductor and equipment stocks STMicroelectronics and Aixtron (AIXGn.DE) climbed 4% and 4.5%, respectively.
Industrial shares (.SXNP) moved higher with German defense firm Rheinmetall (RHMG.DE) adding 3%.
Conversely, utilities (.SX6P) fell 1.2% and food & beverages (.SX3P) lost 0.6%. Beverage makers Anheuser-Busch (ABI.BR), Heineken (HEIN.AS) and Carlsberg (CARLb.CO) were down between 1.5% and 1.7%.
Among other movers, Thyssenkrupp (TKAG.DE) gained 2.1%. The German industrial giant paused talks to sell its steel unit to India's Jindal Steel (JINT.NS).
Umicore (UMI.BR) jumped 13% after the Belgian materials group lifted its full-year EBITDA guidance.
A survey showed that German manufacturer sentiment turned negative in April, even as overall activity grew.
