European Shares Reach New Highs; Tariff Concerns Persist

By Nikhil Sharma and Johann M Cherian

(Reuters) - European shares closed a choppy Tuesday session at a record high, as investors weighed the European Union's response to U.S. President Donald Trump's tariff hike on all steel and aluminium imports that sparked a decline in basic resources stocks.   

The pan-European STOXX 600 index rose 0.2%, with banking stocks leading sectoral gains with a 1.4% rise.  

Basic resources fell 1.9%, tracking a drop in base metal prices after Trump imposed tariffs on all steel and aluminium imports that will take effect from next month and is also expected to announce reciprocal tariffs on all countries that impose duties on U.S. goods this week.

Shares in European steelmakers, which account for about 15% of U.S. imports, fell. ArcelorMittal and Voestalpine stocks dropped 1.9% and 0.9%, respectively, while Thyssenkrupp fell 3.9%.

European Commission President Ursula von der Leyen condemned the Trump administration's move and said that the 27-nation bloc would take "firm and proportionate countermeasures".

"Markets are just waiting to see exactly how the European Union will respond and we've seen in the past with, of course, Canada and Mexico - the fact that tariffs are announced doesn't necessarily mean they're gonna be implemented in full or implemented when he says they will be," said Daniela Hathorn, senior market analyst at Capital.com.

Meanwhile, travel and leisure was the top sectoral laggard, down 2.3%, dragged by an 11% drop in Entain after the British bookmaker said CEO Gavin Isaacs would step down immediately.

TUI fell 10.8% after Europe's largest travel operator said its bookings growth weakened, sending shares of rival airlines such as Lufthansa, easyJet and Wizz Air down between 1.2% and 3.9%.

The STOXX luxury index rose 1.1%, with Kering up 1.3% after the French luxury group reported fourth-quarter revenue above expectations.

Despite an uncertain global trade backdrop, the benchmark STOXX index has logged gains of about 7.8% so far this year as analysts expect Trump's moves to be negotiating tactics and as investors focus on corporate earnings.

Among others, Vaar Energi shares rose 6% after the oil and gas exploration and production company raised its dividend and posted fourth-quarter operating profit in line with expectations. 

Swiss testing and certification company SGS jumped 6.7% after it reported slightly better-than-expected profit.

EssilorLuxottica rose 1.7% after Jefferies upgraded the Franco-Italian eyewear maker to "buy" from "hold".

Kemira fell 8.1% after the Finnish chemical solutions maker missed fourth-quarter profit forecasts.

Focus was also on comments from U.S. Federal Reserve Chair Jerome Powell who said the central bank was in no rush to cut its short-term interest rate again.

(Reporting by Nikhil Sharma and Johann M Cherian; Editing by Mrigank Dhaniwala, Arun Koyyur and Emelia Sithole-Matarise)