European stocks close lower as caution lingers on US trade policy progress

By Nikhil Sharma and Purvi Agarwal

May 28 (Reuters) - Europe's main stock index closed lower amid broader declines on Wednesday as investors monitored progress in trade negotiations with the United States and assessed a slate of economic data from the region.

The continent-wide STOXX 600 index .STOXX was down 0.6% on the day, after two consecutive sessions of gains after U.S. President Donald Trump delayed tariffs on the European Union.

Reports on Tuesday said EU policymakers had asked the region's leading companies to provide details of their U.S. investment plans.

German automakers including BMW BMWG.DE, Mercedes-Benz MBGn.DE and Volkswagen VOWG_p.DE are in talks with Washington on a possible import tariff deal.

The automobile sector .SXAP was 0.7% higher.

Despite signs of a thaw in the trade tensions between the U.S. and Europe, investors remained on edge as they struggled to keep up with the erratic nature of Trump's trade policies.

"Over the next weeks, the market will be in a relatively tight trading range because investors are waiting to see what Trump does," said Nick Brooks, head of economic and investment research at ICG.

Brooks added that it was too early to say anything definitive about automakers talking directly with the U.S. as negotiations lie in the hands of the EU as a whole.

Germany's main stock index .GDAXI retreated 0.8% after hitting a record high earlier in the session, while the mid-caps index .MDAXI hit its highest since April 2022.

Fresh data indicated that German import prices unexpectedly contracted by 0.4% year-on-year in April and that unemployment in Europe's largest economy grew at a faster-than-expected pace in May.

Uncertainty stirred up by U.S. trade policy shifts and price pressures are leading to higher expectations that the European Central Bank will cut interest rates next week.

In France, the CAC 40 index .FCHI closed 0.5% lower, reversing earlier gains after gross domestic product figures showed slight growth in the first quarter, as expected.

The defence index .SXPARO extended gains by 0.7% as investors continued to flock towards the military ammunition companies amid little hopes of a pause to the ongoing Russia-Ukraine tensions.

Reuters reported that Russia's conditions for ending the war in Ukraine include a demand that Western leaders pledge in writing to stop enlarging NATO eastwards and lift a chunk of sanctions on Russia.

Elekta EKTAb.ST shares topped the STOXX 600 after beating estimates for fourth-quarter sales, up 5.9%

Kingfisher KGF.L fell 3.6% as the home improvement retailer's first-quarter results failed to impress investors.

Stellantis STLAM.MI dipped 2.2%. The Jeep-maker named insider Antonio Filosa as its top boss.

Global markets were focused on quarterly results from AI chipmaker Nvidia NVDA.O, due after the close of trading on Wall Street.