European shares slumped for a second day on Tuesday as investors took flight on renewed fears of euro zone break-up risk as Italy embarked on a new election campaign which could become a proxy referendum on euro membership.
Italy’s main stock index sank to a nine month low in early deals, down 1.6pc by 07:25 GMT.
Italian bank stocks slumped another 2.5pc, having lost 4pc in the previous session, bruised by a sell-off in government bonds, a core part of the banks’ portfolios.
Read more: Fears fresh Italian election will be a ‘euro referendum’
Intesa Sanpaolo, BPER Banca, Unicredit and UBI Banca fell sharply, down 3.4 to 3.7pc, while Poste Italiane also tumbled 4.5pc.
Reawakened anxieties over a potential collapse of the euro zone caused Sentix’s euro zone break-up index to climb to its highest since April 2017, when investors feared a eurosceptic Le Pen presidency in France.
The pan-European STOXX 600 fell 0.8pc, with banks the worst-performing.
The euro zone’s banks index sank 2pc and was on track for its biggest monthly drop since the Brexit vote in June 2016.
The stress in Italy spread to other peripheral euro zone markets, with Spanish and Portuguese bank stocks firmly in the firing line.
Banco Comercial Portugues fell 4.5pc, while Spain’s Santander led the IBEX down with a 3.1pc drop.
British retailer Dixons Carphone plunged 21pc after a profit warning. The new chief executive warned the company needed to close stores at a time of a contracting UK electrical market.
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