UPDATE 2-European shares pressured by U.S.-China trade jitters

European shares slid on Thursday, with investors exiting positions in favour of safer assets as they waited to see if U.S.-China talks will yield tangible results and help avert worsening trade ties which threaten to slow global growth.

An increase in U.S. tariff on imports from China is set to be triggered on Friday, while Chinese Vice Premier Liu He starts two days of talks in Washington on Thursday. His country has asked the United States to meet it halfway to salvage a deal. However, U.S. President Donald Trump's insistence that China "broke the deal" and Beijing's response that it would retaliate against a planned U.S. tariff increase dampened the prospect of a trade agreement which would calm investors' nerves.

The pan-European STOXX 600 index fell 1.7 percent to clock a 1-1/2 month closing low as almost all sectors declined, while the volatility gauge on euro zone blue-chips hit its highest in more than four months during the day. "European equity markets are in turmoil... Europe is getting hit in the cross-fire because when the two largest economies in the world engage in a trade war, it bodes badly for everyone," David Madden, market analyst at CMC Markets UK, wrote in a note.

Trade-sensitive German stocks declined 1.7 percent in their biggest one-day fall in three months. Paris-traded equities gave up 1.9 percent, while their peers in Milan eased 1.8 percent. Stocks of auto-makers and their suppliers tumbled 2.9 percent.

Automotive supplier Continental's shares dived 5.3 percent. It reported a 22 percent slump in net profit on slowing global car demand and said its powertrain division's spin-off will depend on the auto market recovering. Technology shares dropped 2.3 percent, with all but two stocks on the sector's index ending lower.

Tariff-sensitive auto and tech stocks have significantly underperformed the STOXX 600 this month amid worsening U.S.-China trade ties, as shown by the chart below. Shares of luxury goods firms, broadly reliant on China for growth demand, dropped. Gucci owner Kering fell 2.7 percent, while Paris-listed Hermes International dropped 1.8 percent.

Bank shares fell 2.3 percent, with each lender's stock falling. Italy's Banco BPM dived 8.2 percent after a slide in revenues dragged down its profits. With growth concerns being the theme of the day, ArcelorMittal shares dived 6.1 percent after the steelmaker cut demand forecast for its key markets and said it was facing the twin challenges of lower steel prices and lower consumption in Europe.

Real estate stocks, broadly considered a defensive sector, were the rare bright spot on the day as they tacked on 0.4 percent. Leg Immobilien AG climbed 2.9 percent, as it confirmed its goal for a core earnings margin of 73 percent in 2019.

(Reporting by Aaron Saldanha and Medha Singh in Bengaluru; Editing by Hugh Lawson)

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)