The European markets fell for the second day on Tuesday, as some investors took profits from recent hefty gains and after news broke out that European Union bank regulators will conduct confidential stress tests by September and Credit Suisse warned that margin pressures could hit Royal Bank of Scotland, Barclays and Lloyds by up to £20 billion.
The European Union will 'stress test' its banking system by September to determine the sector's resilience to the economic downturn and to find out if it is adequately capitalized, the Committee of European Banking Supervisors said. The European Union's plan follows a similar test of 19 U.S. banks, which concluded that 10 of them should boost their capital by around $75 billion in total.
The International Monetary Fund said the severe economic downturn in Europe could end during the second half of 2010, followed by a gradual recovery. It added that further policy actions in the financial sector would be essential to induce this recovery.
The U.S. Commerce Department said the country's trade deficit widened to $27.6 billion in March from a revised $26.1 billion in February. Economists had expected the deficit to widen to $29.0 billion compared to the $26.0 billion originally reported for the previous month.
Crude for June delivery rose $0.23 to $58.73 a barrel on the New York Mercantile Exchange, by the time the European markets closed. The contract rose as high as $60.08 a barrel earlier in the session.
The FTSEurofirst 300 index of pan-European blue chips closed 0.23% lower at 852.62 points, while the narrower DJ Stoxx 50 index fell 0.02% to 2,090.60 points.
Around Europe, the U.K.'s FTSE 100 index fell 0.22% to 4,425.54, while France's CAC 40 index dropped 0.54% to 3,231.10 and Germany's DAX index slipped 0.26% to 4,854.11.
Banking stocks were among the worst losers. Royal Bank of Scotland, Britain's second largest bank, slid 5.6%, while Barclays, the third largest, dropped 6.5% and Lloyds Banking Group, Britain's biggest mortgage lender, tumbled 10.3%. UBS, Switzerland's largest bank, lost 7.3%.
Mining stocks also lost ground. BHP Billiton, the world's biggest miner, fell 2.5%, while Anglo American, the second biggest, slipped 2.9% and Rio Tinto, the third biggest, dropped 6.9%. Copper miner Antofagasta lost 3.6%.
ThyssenKrupp, Germany's biggest steelmaker, slid 6.4% after the company said it expects to post a full year loss.
EADS, parent of commercial plane maker Airbus, fell 3.3% after the company reported a 40% drop in first quarter profit.
Imperial Tobacco, the world's second largest cigarette maker, slipped 4% on concern dividends may be restricted by costs for cutting jobs after the takeover of Altadis SA.
On the other hand, heavily weighted oil stocks edged higher after crude oil prices advanced. BP, Europe's biggest oil company rose 0.5%, while Royal/Dutch Shell, the second biggest, surged up 1.3% and Total, the third biggest, added 0.6%.
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