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European shares hit a one-month closing low on Tuesday as disappointing results from UBS and Royal Bank of Scotland's plan to sell off some businesses to limit government support hurt banks.
The FTSEurofirst 300 index of top European shares provisionally closed 1 percent down at 970.26 points, the lowest closing level since early October. The index, which slumped 45 percent last year, is still up 16 percent in 2009 and has surged 50 percent since hitting a record low in early March.
Financials were among the biggest losers. The DJ STOXX European bank index, which has spiked 150 percent since hitting a floor in March, was down 2.7 percent after touching its lowest level since mid-August.
"People are worried about the banking sector once again because we have had a couple of European results that were somewhat worse than expected," said Luc Van Hecka, chief economist at KBC Securities.
"In this market, once you have had a run up of about 60 percent, it's nothing unusual that you get some temporary corrections, and it could be easily 10 to 15 percent. But fundamentals are still such that this will not go too far."
UBS fell 5.8 percent after higher-than-expected accounting charges pushed it into its fourth consecutive quarterly loss and disappointing net withdrawals of 36.6 billion Swiss francs ($36 billion) at its key wealth and asset management business.
A shake-up of British banks Royal Bank of Scotland [RBS-LN Loading... ()] and Lloyds Banking Group, [LLOY-LN Loading... ()] and the European Commission's estimates after results of stress tests in the banking sector showing losses could amount to 400 billion euros ($590.9 billion) in 2009-2010, raised questions about the sector.
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RBS was down 5.9 percent after hitting a six month low earlier in the session. It said it would join the government's asset protection scheme (APS), designed to insure riskier loans.
Lloyds, however, gained 3.4 percent as investors felt relieved that a record 13.5 billion pound ($22 billion) rights issue would mean that the bank would be able to stay out of the government's APS scheme.
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