European shares stumble on Trump's new tariff threat

By Purvi Agarwal and Ragini Mathur

June 2 (Reuters) - European shares began June on a dour note as markets grappled with U.S. President Donald Trump's new tariff plans that threatened to reignite a fresh wave of global trade tensions.

The continent-wide STOXX 600 .STOXX slipped 0.1% on Monday, after recording about a 4% gain in May.

Late on Friday, Trump said he planned to increase tariffs on imported steel and aluminium to 50% from 25%, to which the European Union said it was prepared to retaliate.

Steel companies as ArcelorMittal MT.AS and Aperam APAM.AS pared some losses and closed marginally lower.

The automobile sector .SXAP, however, bore the brunt of the trade jitters, falling 2.1%, the most among sectors.

Milan-listed Stellantis STLAM.MI down 5%. Mercedes-Benz MBGn.DE, BMW BMWGn.DE and Volkswagen VOWG_p.DE fell between 1.9% and 2.7%.

Even Luxury stocks, reliant on global exports dropped, with the broader gauge .STXLUXP was down 0.8%.

An index measuring volatility in the market .V2TX climbed 4.3% - at a one-week high.

"The market was definitely in what we would call risk off mode," said Steve Sosnick, chief market analyst at Interactive Brokers.

"But each piece of rhetoric is having less of an effect than the prior ones because markets have mostly learned to shrug it off. Yet it cannot be shrugged off entirely."

Data-wise, European manufacturing moved closer to stabilization in May, according to HCOB Eurozone PMI data.

However, Europe's largest economy, Germany, remained the weakest performer among the big euro zone members with a PMI of 48.3.

Germany's DAX .GDAXI closed 0.3% lower.

Oil stocks .SXEP outperformed, with the sector jumping 1.4%, as crude prices surged after OPEC+ announced a smaller-than-feared production increase for July. O/R

Some of the UK's defence manufacturers gained after the news that Britain will expand its nuclear-powered attack submarine fleet.

Babcock International Group BAB.L and QinetiQ Group QQ.L advanced 8.2% and 4.5% respectively.

In Poland, stocks .WIG20 were flat. Opposition candidate Karol Nawrocki narrowly won the presidential election, dealing a significant blow to the centrist government's pro-European agenda.

Media stocks such as France's Publicis Groupe PUBP.PA and WPP WPP.L fell 3.8% and 2.8% respectively. The Wall Street Journal reported that Meta Platforms META.O aimed to fully automate ad creation with AI by the end of next year.

Among other stocks, Sanofi SASY.PA agreed to buy U.S.-based Blueprint Medicines Corporation BPMC.O, paying $129 per share, representing an equity value of approximately $9.1 billion.

Shares in the French pharma group fell 1.8%.

This week, all eyes will be on the European Central Bank's interest rates on Thursday, with money market traders are almost fully pricing in a quarter-point cut.

Insights from ECB President Christine Lagarde are due at 1730 GMT.