UPDATE 2-European shares drop from record high on threat of U.S. auto tariffs

* Automobile stocks hit hard by threat
* EU can respond with tariffs of its own- German Ambassador
* Anticipation of ECB meet keeps selling constrained
* Italian stocks fall on reports Di Maio to step down

(Updates to close, adds comments, details)
By Ambar Warrick
Jan 22 (Reuters) - European shares reversed course and edged
lower on Wednesday as U.S. President Donald Trump threatened to
impose high tariffs on imports of cars from the European Union,
pushing automobile stocks to a three-month low.
Speaking at the World Economic Forum in Davos, Switzerland,
Trump warned of the tariffs if the EU did not agree to a trade
deal. The EU and the United States have recently locked horns
over issues ranging from a French digital tax to aircraft
subsidies. The threat prompted a response from Germany's ambassador to
the United States, Emily Haber, that the EU could also impose
duties on U.S. products. The pan-European STOXX 600 index .STOXX was 0.1% down,
having touched a record high of 424.94 earlier in the day.
Automobile stocks .SXAP were the worst performing sector,
dropping more than 1% to their lowest since mid-October. The
tariffs threaten to increase pressure on a sector that has
already been grappling with a fall in global demand.
Finnish tyre maker Nokian Tyres TYRES.HE and German car
maker Daimler DAIGn.DE were the top losers on the auto
subindex.
Losses in the STOXX 600 were somewhat tempered by
anticipation of a European Central Bank meeting on Thursday,
while news of Chinese measures to contain a new virus also lent
some support. While the ECB is widely expected to stand pat on its
benchmark interest rate during its first meeting in 2020,
investors will be watching for the bank's outlook for the year,
with economic growth in the bloc seen bottoming out.
"What you normally see before a big event, which is the ECB
tomorrow, is that markets are basically not moving too much,"
said Teeuwe Mevissen, senior market economist at Rabobank in
Amsterdam.
Italy's FTMIB .FTMIB lagged after reports that Luigi di
Maio would step down as the leader of the co-ruling 5-Star
Movement, stirring fresh election uncertainty. Frankfurt's DAX .GDAXI fell 0.3%, having touched a record
high earlier in the day following a survey on Tuesday that
showed a U.S.-China trade truce had lifted German investor
morale to its highest since 2015.
German agrigoods maker K&S AG SDFGn.DE was the worst
performer on the STOXX 600 after Bank of America resumed
coverage of the stock with an "underperform" rating.

On the other hand, Norway's Gjensidige GJFS.OL was the
best performer on the STOXX 600, ending at a record high after
the insurer posted better-than-expected fourth-quarter earnings
and set an extra dividend on top of its normal payout to
shareholders.