(Recasts ahead of U.S. trading, updates prices throughout)
* European car shares fall on U.S. tariff worries
* Beijing injects masses of cash into financial system
* Huawei subject of U.S., German displeasure
* Pound supported as May wins confidence vote
* Graphic: World FX rates in 2019 tmsnrt.rs/2egbfVh
* Asian stock markets: tmsnrt.rs/2zpUAr4
By Marc Jones
LONDON, Jan 17 (Reuters) - Concern over China’s economic outlook and possible U.S. tariffs on European cars dragged stocks lower on Thursday, while an anti-climactic end to the latest chapter in the Brexit saga offered sterling a moment’s peace.
Fresh news had been thin on the ground during the European morning, but dealers had more than enough to digest from the last 24 hours to follow Asia’s lead and nudge the main bourses into the red.
Europe’s carmakers fell as much as 1.5 percent after U.S. Senate Finance Committee Chairman Charles Grassley said he thought Donald Trump was “inclined” to impose tariffs on European cars to win better terms on agriculture.
Banks were hit by disappointing Societe Generale results and the tech sector was under pressure too after one of world’s biggest chip producers, Taiwan Semiconductor, forecast its steepest drop in revenue in a decade.
“There is some focus on the Grassley comments in relation to auto trade tariffs and also reference to there not being much progress in the U.S. China negotiations last week,” said Bank of Tokyo Mitsubishi strategist Derek Halpenny.
“There has obviously been a lot of optimism (in markets) since the start of the year and risk appetite has had a pretty good run, but this will place a few question marks over that.”
MSCI’s broadest index of world stocks was fractionally lower having hit a five-week high. Markets like Japan had dithered in both directions while futures pointed to Wall Street starting 0.3 percent lower.
Some took heart at Beijing’s confirmation that Chinese Vice Premier Liu He will travel to the United States on Jan. 30 for more negotiations with Washington, but it wasn’t enough to tip the balance more broadly.
China’s blue-chip index had ended down 0.55 percent, led lower by a decline in the country’s second-largest home appliances maker, Gree Electric, after it warned of slower profit growth as the economy loses steam.
Chinese Premier Li Keqiang promised increased government investment this year and the country’s central bank injected more cash into the financial system, bringing the amount for the week to 1.14 trillion yuan ($168.74 billion).
Stoking additional caution however was news that U.S. lawmakers introduced bills on Wednesday that would ban the sale of U.S. chips or other components to Huawei or other Chinese telecoms firms that violate U.S. sanctions or export control laws.
That came shortly before the Wall Street Journal reported federal prosecutors were investigating allegations that Huawei stole trade secrets from U.S. businesses.
Separately, Handelsblatt reported the German government is actively considering stricter security requirements and other ways to exclude Huawei from a buildout of fifth-generation (5G) mobile networks.
Also lurking were worries the U.S. government shutdown was starting to take a toll on its economy. White House economic adviser Kevin Hassett said the shutdown would shave 0.13 percent off quarterly economic growth for each week it goes on.
As expected, British Prime Minister Theresa May narrowly won a confidence vote overnight and invited other party leaders for talks to try to break the impasse on a Brexit agreement.
An outline for Plan B is due by next Monday and markets are currently assuming that with no easy way forward for May she will have to extend the date of Britain’s exit from the European Union past the scheduled March 29.
“Nothing has happened in the last 24 hours to dissuade us from the view that we are headed in the direction of an Article 50 delay, a softer Brexit or no Brexit,” said Ray Attrill, head of FX strategy at NAB.
All of which left the pound at $1.2872, and though it was still short of Monday’s peak of $1.2929, it did manage a new seven-week high of 88.32 pence against the euro before steadying .
The U.S. dollar was mixed, easing against the yen to 108.80 but flat versus the euro at $1.1400. The dollar index was barely moving too at 96.043 as a drop in euro zone bond yields also helped drag down those on Treasuries.
In commodity markets, palladium hit record highs thanks to increasing demand and lower supply while gold was little changed at $1,294.91 per ounce.
Oil prices eased as traders worried about the strength of demand in the United States after its gasoline stockpiles grew last week more than analysts had expected.
U.S. crude futures fell 38 cents to $51.93 per barrel. Brent slipped 40 cents to $60.92.
($1 = 6.7560 Chinese yuan renminbi)
Additional reporting by Wayne Cole in Sydney; Editing by Catherine Evans