By Sarah Turner
European stocks fell amid persistent worries about swine flu and concern over the health of the banking system.
The pan-European Dow Jones Stoxx 600 Index fell 1.5% to 193.57. On a regional level the U.K. FTSE 100 Index fell 1.7% to 4096.40, the German DAX 30 Index lost 1.9% to 4607.42 and the French CAC-40 Index declined 1.7% to 3051.02.
Bank shares took a beating after The Wall Street Journal reported that Bank of America /zigman2/quotes/200894270/composite BAC -0.73% and Citigroup /zigman2/quotes/207741460/composite C +0.04% may need to raise more capital. Royal Bank of Scotland, Lloyds /zigman2/quotes/202285510/delayed UK:LLOY +0.37% and BNP Paribas /zigman2/quotes/206351084/delayed FR:BNP +2.42% all lost between 3% and 5% on rekindled worries about capital adequacy.
Andrew Lynch, portfolio manager at Schroder Investment Management noted that there's no detail on the amounts that could be involved, that the results of the U.S. bank stress tests aren't yet known and that shares of lenders have had a very strong run in recent weeks.
"It would perfectly reasonable to take a bit of profit," he said.
Deutsche Bank shares fell 6.9%. The lender returned to a profit in the first quarter of 2009 thanks to a surge in revenue from bond sales and trading, though it took further write-downs on its exposure to bond insurers.
Travel stocks and airlines came under notable pressure for a second day as the number of confirmed and suspected cases of swine flu world-wide rose. The World Health Organization increased its alert level on the deadly disease.
"Until there is more clarity, markets will continue to focus on swine flu newsflow. At this stage, we see the key concern as tourism," said analysts at UniCredit.
Shares of British Airways /zigman2/quotes/229948113/delayed UK:BAY 0.00% fell 5.4% and shares of Carnival /zigman2/quotes/210414141/delayed UK:CCL +0.96% declined 2.5%. Ferrovial -- which owns U.K. airport operator BAA -- fell 6.4% in Madrid.
Irish airline Aer Lingus plummeted 20% after it warned that falling airfares in 2009 would push its earnings for the year below even the most pessimistic forecasts.
Elsewhere, Daimler shares fell 3.7% after the German auto maker posted a worse-than-expected net loss in the first quarter as global demand for trucks and luxury cars collapsed. Renault lost 5.2% and BMW shares slid 4.4%.
Mineral extractors also lost ground, with Xstrata down 6.1% and Vedanta Resources shares down 4.6%.
BP /zigman2/quotes/202286639/delayed UK:BP +3.25% inched 0.1% higher. The oil giant's first-quarter adjusted net profit drop wasn't as bad as analysts had been expecting. Net profit fell 64% to $2.56 billion.
Yara shares rose 12.7% after the fertilizer firm beat analyst expectations by posting a 68% drop in first-quarter net profit.
Most Asian markets tumbled for a second straight day Tuesday, with financials beaten down in afternoon trading on concerns U.S. banks may have to raise more capital, while worries over the spread of swine flu dragged on airline and tourism-related stocks. Tokyo's Nikkei ended down 2.7%.
Write to Sarah Turner at firstname.lastname@example.org