European stocks fall as Ukraine weighs on sentiment

Europe's main stock markets fell on Tuesday, with London hit by downbeat earnings in the financial sector, while the ongoing Ukraine crisis clouded sentiment, dealers said.

London's FTSE 100 slid 0.35 percent to close at 6,798.56 points, while Germany's DAX 30 lost 0.65 percent to 9,467.53 points and the CAC 40 in Paris dropped 0.78 percent to 4,428.07 points.

"European markets traded in the red today despite positive service sector reports from the UK and the mainland as Barclays reported disappointing earnings and the situation in Ukraine has deteriorated," said analyst Jasper Lawler at CMC Markets UK.

Barclays' shares sank 5.2 percent to 245 pence after the bank revealed that adjusted pre-tax profit fell 5.0 percent to £1.69 billion ($2.87 billion, 2.05 billion euros) in the first quarter, from a year earlier.

Across in Frankfurt, German chemicals and pharmaceuticals giant Bayer announced the acquisition of the consumer care business of Merck Co in the United States for $14.2 billion.

The purchase will make Bayer the world's second-biggest maker of over-the-counter or non-prescription products.

Bayer's share price fell 0.9 percent to 99.07 euros, while Merck dropped 0.6 percent to 120.05 euros.

Shares in telecoms equipment maker Alcatel-Lucent shot up more than 4.0 percent at one point in Paris trading on rumours of a bid from rival Nokia, which is flush with cash from the sale of its handset business to Microsoft. They finished the day with a gain of 2.2 percent to 2.92 euros.

- Investors eye Ukraine tensions -

Investors kept a keen eye on escalating tensions in the Ukraine-Russia crisis.

The death toll from a military offensive in a flashpoint town in east Ukraine rose to at least 34, officials said Tuesday, amid fresh warnings of civil war and the shutdown of a major airport in the region.

"The markets are struggling for direction at the moment, with good news and bad news counteracting each other in seemingly perfect harmony," added Capital Spreads dealer Jonathan Sudaria.

"The situation in Ukraine looks set to be something that will continue to influence financial markets for a considerable amount of time, and markets will struggle to push much higher until investors can see a real improvement in the situation over in eastern Europe."

However the resurgence of investor confidence in the eurozone continued with Italy's long-term borrowing costs falling below the three percent level for the first time since the creation of the euro.

The rate of return for investors on 10-year bonds on the secondary trading market -- the implied costs for governments to borrow fresh funds, had already dropped below three percent on Spanish bonds last week.

In foreign exchange trading, the euro rose to $1.3930 from $1.3874 late in New York on Monday, as dealers awaited this week's European Central Bank monetary policy decision on Thursday.

The European single currency declined to 82.05 British pence from 82.23 pence, while the pound gained to $1.6977 from $1.6868 on Monday.

The price of gold rose to $1,306.25 an ounce on the London Bullion Market, from $1,281.25 on Monday.

- Asian markets mostly advance -

Asian equities mostly rose on Tuesday following a pick-up on Wall Street.

Sydney gained 0.35 percent and Taipei added 0.47 percent, while Shanghai ended flat. Tokyo, Hong Kong and Seoul were shut for public holidays.

New York had provided a healthy cue, with all three of Wall Street's main indexes advancing Monday after the Institute for Supply Management said its purchasing managers index (PMI) for the US services sector rose to 55.2 in April from 53.1 in March.

It was the highest reading since last July and better than the 54.0 figure expected by analysts. A number above 50 indicates expansion in the sector, which accounts for the bulk of US economic activity.

On Tuesday US stocks pushed lower despite a decline in the US trade deficit.

In midday trading, the Dow Jones Industrial Average lost 0.44 percent to 16,458.41 points.

The broad-based S&P 500 fell 0.35 percent to 1,878.06, while the tech-rich Nasdaq Composite Index dropped 0.54 percent to 4,115.83.

The Commerce Department said the US trade deficit shrank to $40.4 billion in March from $41.9 billion in February after US exports increased.

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