UPDATE 2-European stocks stumped as U.S. threatens tariffs on Mexico

* STOXX 600 posts monthly loss of 5.7%; worst since Jan,
2016
* Firms with Mexico exposure hit, Spanish lenders decline
* Auto sector drops, sector index plumbs near 5-month
closing low
* Utilities, real estate stocks en vogue; investors rush for
cover

(Recasts throughout, adds quote and graphic, updates to close)
By Aaron Saldanha
May 31 (Reuters) - European stocks tanked on Friday, with
auto-makers hit especially hard, after U.S. President Donald
Trump widened the scope of his trade wars by threatening to
impose new tariffs on Mexican imports. Investors exited riskier equity positions and moved to safer
ground, sending European defensive stocks higher and yields on
German bonds to record lows. GVD/EUR
The pan-Europe STOXX 600 .STOXX fell 0.8% on the day to
close out May with a 5.7% slide, its worst monthly loss since
January 2016.
"President Donald Trump is playing a Game of Thrones with
both foreign and domestic adversaries," Ed Yardeni, president
and chief investment strategist at Yardeni Research, wrote in a
note.
"Since he is the president of the world's greatest economic
and military power, he claimed that he will consummate lots of
deals with them that will greatly benefit the U.S. in short
order," said Yardeni, adding that "the results have been mostly
disappointing so far."
Germany's trade-sensitive DAX .GDAXI fell 1.5% to an about
five-month closing low. French stocks .FCHI slid 0.8%,
matching their London peers .FTSE .
Trump's move hit European stocks exposed to Latin America's
second largest economy. Madrid-listed banks Santander SAN.MC ,
Sabadell SABE.MC and Bilbao BBVA.MC , all of whom have a
sizable presence in Mexico, slid between 2.4% and 4.1%.
Carmakers and their suppliers .SXAP shed 2%, while Fiat
Chrysler FCHA.MI and Volkswagen VOWG_p.DE - which import
cars to the U.S. from Mexican plants - shed 4.8% and 2.6%
respectively.
During May, tariff-exposed auto-stocks have greatly
underperformed the STOXX 600, which itself has lagged the S&P
500 .SPX .
Milan-listed stocks .FTMIB fell 0.7%, with local banks
.FTIT8300 matching that decline. The country's lenders were
hit by the Bank of Italy warning that public debt could rise
more than forecast this year. Frankfurt-listed Wirecard WDIG.DE tumbled 8.7% after a
Handelsblatt report on an investigation by authorities into
fraudulent transactions in the sector. Utilities .SX6P edged 0.2% higher, while real estate
stocks .SX86P - a refuge for investors at times of tariff
turmoil - rose 0.6%.
Athens-traded stocks .ATG provided a rare spot of optimism
on the day, rising 1.5% to a near 13-month peak. The index
posted a 7.4% gain for May, aided by news of snap elections
being called.

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Performance of STOXX 600 Auto and parts sub-index against STOXX
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