Banks rattle European stocks

European stock markets slumped on Tuesday, dragged down by disappointing bank results, as the EU cut its forecast for eurozone growth.

But the euro still managed to reach an eight-month high against the dollar, which tumbled also versus the yen on dwindling prospects of a further hike in US interest rates any time soon, according to analysts.

Weak earnings updates from German titan Commerzbank and Swiss lender UBS were partly offset by better-received numbers out of HSBC and BNP Paribas, whose share prices rose.

But Commerzbank's stock dived 7.8 percent to 7.39 euros and UBS tumbled 7.4 percent to 15.31 Swiss francs in afternoon deals.

The European Union meanwhile on Tuesday cut its eurozone growth forecasts for this year, warning that global risks including the slowdown in China and the danger of Britain leaving the bloc were harming economic recovery.

Around 1330 GMT, London's benchmark FTSE 100 index was down 0.7 percent.

In the eurozone, Frankfurt's DAX 30 shed 1.6 percent and the Paris CAC 40 retreated 1.2 percent, compared with Monday's closing values.

"While European stocks finished April on a bit of a sour note they still finished higher for the second month in succession," noted Michael Hewson, analyst at trading group CMC Markets UK.

"It is hard to escape the feeling though that the recovery seen since the February lows continues to be a rather half-hearted affair."

The euro hit an eight-month high at $1.1616. The US currency fell to 105.55 yen, an 18-month low.

The shifts follow figures released Monday that showed that growth in US factory activity slowed last month, and last week's soft consumer spending report and news that the world's top economy expanded less than expected in the first quarter.

The yen's recent rally, which picked up pace last week when the Bank of Japan shocked markets by not expanding its stimulus, has led Tokyo to warn of possible intervention as it tries to protect the country's exporters.

Attention was already turning to the release of US jobs data on Friday. Many expect a slowdown in hiring, which would in turn force the Fed to further delay tightening monetary policy.

Wall Street stocks opened solidly lower Tuesday, with the Dow dropping 0.7 percent, taking cues from weak Chinese manufacturing data and poor European bank earnings.

Chinese factory activity fell by 0.3 point to 49.4 in April, according to the private Caixin survey of purchasing managers, further below the 50 level that separates growth from contraction.

Nevertheless Shanghai stocks rallied, ending three days of losses, as speculation swirled the Chinese government would introduce new measures to support the market.

And Sydney soared more than two percent after Australia's central bank slashed interest rates to a record low after inflation last week came in well below expectations.

- Key figures around 1330 GMT -

London - FTSE 100: DOWN 0.7 percent to 6,201.05

Frankfurt - DAX 30: DOWN 1.6 percent at 9,958.46

Paris - CAC 40: DOWN 1.2 percent at 4,389.40

EURO STOXX 50: DOWN 1.5 percent at 2,988.53

New York - Dow: DOWN 0.7 percent at 17,763.95

New York - S&P 500: DOWN 0.7 percent at 2,067.52

New York - Nasdaq: DOWN 0.7 percent at 4,786.05

Hong Kong - DOWN 1.9 percent at 20,676.94 (close)

Shanghai - UP 1.9 percent at 2,992.64 (close)

Tokyo - Nikkei 225: Closed for public holiday

Euro/dollar: UP at $1.1559 from $1.1535 Monday

Dollar/yen: DOWN at 105.93 yen from 106.42 yen