(MENAFN- AFP) Europe's equity markets retreated Tuesday on fears over banks and disappointment over Japan's vast stimulus, dealers said.
Milan stocks tanked 2.8 percent as shares in crisis-hit Italian bank Monte Paschi di Siena (BMPS) plunged 16 percent after investors were swept up by concerns about the plans to shore up the worst performing lender in Europe-wide stress tests.
Frankfurt and Paris both shed 1.8 percent and London lost 0.7 percent, hit also by weak post-Brexit construction survey data.
The indices had also fallen Monday on poor economic figures -- and as traders expressed doubts over last week's stress tests which had indicated that the region's banks were broadly resilient.
"European shares were lower on Tuesday with banks leading the decliners for a second day over rising scepticism of the weekend's stress test results," said CMC Markets analyst Jasper Lawler.
British bank Barclays sank 3.6 percent in London, while French peers BNP Paribas and Societe Generale lost 4.3 percent and 3.1 percent respectively.
Shares in other Italian banks were also down sharply, including Unicredit, which fell by 7.2 percent after plunging by 9.4 percent on Monday.
Italy's largest bank has recently sold off stakes in two businesses, but investors are concerned that it will have to raise more capital, which will dilute the holdings of current owners of shares.
Madrid's stock index fell 2.8 percent, pulled down by a 5.3 percent drop in Santander, the largest eurozone bank by capitalisation.
"Investors fear that the current environment won't allow the banks to keep their heads above the water in the years to come," said analysts at brokerage Aurel BGC.
Ultra-low interest rates brought in by major central banks to ward off economic crisis have made it difficult for banks to earn money from lending.
US stocks also slid, with the Dow Jones Industrial Average 0.6 percent in late morning trade.
In the face of economic uncertainty, meanwhile, investors flocked to safe havens like the Japanese yen and gold.
Japan's cabinet Tuesday approved a mammoth 28-trillion yen ($273 billion) package in its latest attempt to stimulate lacklustre growth, but the plan fell flat on global markets as it includes just 7.5 trillion yen in fresh spending.
The news comes after the Bank of Japan (BoJ) underwhelmed investors with modest tweaks to its own stimulus measures last Friday.
- Japanese stimulus faces 'scepticism' -
"The market was disappointed by the size of last week's BoJ policy announcement," Rabobank analyst Jane Foley told AFP on Tuesday.
"Today has brought further news regarding the latest fiscal expansion.
"Not only was the market well prepared for this but after successive recessions and prolonged bouts of deflation over the past 25 years, it is difficult for the market not to greet each fiscal package with scepticism."
Japan's economy is suffering from sluggish growth as a recent spike in the yen threatens corporate profits.
At RIA Capital Markets, strategist Nick Stamenkovic argued that the stimulus figure was "overstated".
"The headline figures overstates the size of the latest Japanese fiscal stimulus; the incremental rise in fiscal spending is close to market expectations, disappointing investors," Stamenkovic said.
"Moreover, the BoJ is showing little inclination to ease policy soon. As a result, investors continue to fret about the outlook for Japan, supporting gold and the yen."
Hong Kong's stock exchange was shuttered Tuesday as Typhoon Nida slammed the city with violent winds and torrential rain.
- Key figures around 1530 GMT -
London - FTSE 100: DOWN 0.7 percent at 6,645.40 points (close)
Frankfurt - DAX 30: DOWN 1.8 percent at 10,144.34 (close)
Paris - CAC 40: DOWN 1.8 percent at 4,327.99 (close)
Milan - FTSE MIB: DOWN 2.8 percent at 16,098 (close)
EURO STOXX 50: DOWN 2.0 percent at 2,908.86
New York - DOW: DOWN 0.6 percent at 18,288.88
New York - S&P 500: DOWN 0.7 percent at 2,154.96
New York - Nasdaq: DOWN 1.0 percent at 5,128.65
Tokyo - Nikkei 225: DOWN 1.5 percent at 16,391.45 (close)
Shanghai - Composite: UP 0.6 percent at 2,971.28 (close)
Hong Kong - Hang Seng: closed
Euro/dollar: UP at $1.1225 from $1.1160
Pound/dollar: UP at $1.3311 from $1.3178
Dollar/yen: DOWN at 100.96 yen from 102.41 yen
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