STOXX ends lower as auto giants weigh; investors parse inflation data

HSBC jumps after results, $3 bln in fresh buybacks

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BBVA, Sabadell to explore possible merger

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Euro zone rebounds from recession as inflation steadies

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STOXX 600 notches first monthly loss in six

April 30 (Reuters) - European shares closed lower on Tuesday weighed by a bleak raft of earnings reports from the region's top car makers, while investors also assessed a possible merger between two Spanish banks and data that signalled improving economic fundamentals.

The continent-wide STOXX 600 stocks index slipped 0.6%, bogged down by a 4.3% loss in the automobile sector , the sector's biggest drop since September 2022.

Volkswagen, Mercedes-Benz and Stellantis tumbled between 4% and 10% after posting lower sales and first-quarter revenue as they geared up to launch new models, faced higher costs and were hit by weaker demand for new cars.

On the mergers and acquisitions front, BBVA dropped 6.6% after the currency union's second biggest lender and smaller rival Sabadell said they had started negotiations to explore a possible merger. Sabadell's shares rose 3.5% on the news.

Meanwhile, data showed the euro zone economy rebounded in the first quarter from a mild recession as Germany returned to growth, while inflation steadied, reinforcing the case for a June interest rate cut by the European Central Bank.

"The continued modest recovery is putting the euro zone on track for a better-than-expected growth rate for 2024," said Bert Colijn, senior euro zone economist at ING Bank.

"With inflation remaining relatively benign at the moment and unemployment at record lows, the economic environment in the eurozone is looking up."

The benchmark STOXX index hit a volatile patch in April and is trading nearly 14% away from its record high. It logged its first monthly decline in six, knocked down by record-high interest rates, Middle East tensions and uncertainty about the ECB monetary policy outlook.

Miners and energy are on track to become the top sectoral performers this month, while financial services and insurers are the worst hit.

On the day, uncertainties around the path for U.S. monetary policy following data that showed an increase in U.S. first-quarter labour costs caused euro zone yields to tick higher, which weighed on equities.

Among others, HSBC rose 4.1% to top the blue chips STOXX50 index, after the Asia-focussed lender announced its quarterly results, a share buyback plan and CEO Noel Quinn's surprise retirement.

Vonovia climbed 3.9% and outperformed German's DAX after the country's largest real estate group's return to profit in the first quarter.

Finnish engineering group Cargotec jumped 16.3% to the top of the STOXX 600 after first-quarter results.

Satellite company SES shed 14% on agreeing to buy all shares of Intelsat Holdings for about $3.1 billion and reporting first-quarter results. (Reporting by Ankika Biswas and Johann M Cherian in Bengaluru; Editing by Sherry Jacob-Phillips, Sohini Goswami and Jonathan Oatis)