Carmakers drive European shares lower after Trump's tariff threats on EU

Updates after markets close

By Nikhil Sharma and Purvi Agarwal

Feb 27 (Reuters) - European shares retreated from record highs on Thursday, with automakers leading declines as investors evaluated the impact of U.S. President Donald Trump's potential tariffs on the European Union.

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

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

Ferrari RACE.MI was the biggest drag, down 7.9%, after Exor EXOR.AS 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 .SX8P fell 2.2%, dragged by heavyweights SAP SAPG.DE and ASML ASML.AS, after U.S. AI bellwether Nvidia's NVDA.O quarterly results failed to impress investors.

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

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 .FTSE and Ireland's ISEQ .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 RR.L, that hit a record high, after the British engine-maker lifted its mid-term targets and beat 2024 profit growth expectations.

British online supermarket and technology company Ocado OCDO.L dropped 18% to the bottom of the STOXX 600 on market concerns the global roll-out of its robotic sites was too slow.

French IT consulting company Sopra Steria SOPR.PA and kitchen and joinery supplier Howden Joinery's HWDN.L fell 11% and 6.1% respectively after their annual results.

British ad group WPP WPP.L tumbled 16.2% to a more than four-year low after the company reported a bigger-than-expected 1% fall in full-year organic revenue.