* Yields on Italian bonds rise, stocks slide
* Italian bank index ends at lowest close since early
February
* Greek stocks extend gains on poll optimism, banks soar
(Updates to close, recasts, adds graphic, quote on Greek banks)
By Aaron Saldanha
May 28 (Reuters) - European shares dipped on Tuesday, with
bank stocks capturing investors' attention as concerns about a
possible fine on Italy due to the indebted country's yawning
budget deficit exacted a heavy toll on risk sentiment.
The pan-region STOXX 600 .STOXX fell 0.2%, with banks
.SX7P shedding 0.4% and chemicals stocks .SX4P declining 1%.
London-listed shares .FTSE edged down as they traded for
the first time this week, while Germany's DAX .GDAXI ended
0.4% lower, matching the decline in Paris-traded equities
.FCHI . .L
Milan-traded stocks .FTMIB slid 0.5%, with the country's
deputy prime minister saying the European Commission could slap
a 3 billion euro ($3.35 billion) fine on the country for
breaking EU rules due to its rising debt and structural deficit
levels. Matteo Salvini's comments sent yields on Italy's bonds
broadly higher IT10YT=RR while pushing the country's banking
stocks in the other direction. GVD/EUR
Italy's banking index .FTIT8300 dropped 1.2% to its lowest
closing level since early February.
"For Italy, the potential for a doom loop is still looming
in the background where you have an undesirable connection
between the debt possession of the state and the banks," said
Teeuwe Mevissen, senior eurozone market economist at Rabobank.
In contrast to Italian lenders, Greece's banks powered
Athens-traded stocks .ATG 2.3% higher, to a more than one year
closing high on hopes a more business friendly government will
emerge from a snap election called on Monday. Piraeus Bank BOPr.AT surged 15% to lead the benchmark's
gainers, followed by Eurobank Ergasias SA EURBr.AT , with a
9.8% rise.
UBS Analyst Anastasia Solonitsyna wrote in a note that if
the New Democracy party wins the impending election, Kyriakos
Mitsotakis would likely be the new Prime Minister.
Mitsotakis' stated policy intentions could be interpreted as
business-friendly and favourable for banks, she wrote, citing a
proposed corporate tax cut and focus on "attracting foreign
investments which might further boost domestic lending".
Vienna-traded equities .ATX declined 0.2%, a day after
conservative Chancellor Sebastian Kurz fell victim to the first
successful no-confidence motion against an Austrian government
since the country regained its independence in 1955. the gloom on European bourses, stocks of
auto-makers and their suppliers .SXAP rose for a third
straight session, adding 0.7% on the day.
Traders cited a report in China stating the southern
province Guangdong has launched stimulus measures to boost car
sales and relax curbs on car purchases. Peugeot PEUP.PA added 4.6% while Knorr Bremse KBX.DE
rose 1.6%.
($1 = 0.8952 euros)
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Performance of select Italian banks in the month through Monday
(Rebased to 100) https://tmsnrt.rs/2I1vVfz
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