2018.05.2917:59:00UTC+00European Markets Fell as Italy’s Stocks End with 2.7% Loss

European stocks ended lower on Tuesday amid renewed fears of a eurozone break-up risk in Italy and political turmoil in Spain.

Investors were assessing the prospect of fresh elections in Italy, which could effectively serve as a referendum on the euro. The country's president, Sergio Mattarella, on Monday blocked two anti establishment parties from taking power by rejecting their eurosceptic candidate for economy minister. Mattarella then asked Carlo Cottarelli, a former International Monetary Fund official, to try to form a new government.

Meanwhile, political uncertainty in Spain hit Madrid-traded stocks, as Prime Minister Mariano Rajoy's struggle to stay in power raised fears of new elections.

The pan-European Stoxx 600 fell 1.37 percent provisionally, with all major bourses and every sector apart from oil in the red.

Among national indexes, Italy's FTSE MIB dropped 2.65 percent, amid renewed political pain. The euro zone's third-largest economy has been without a government since an inconclusive vote in early March, with anti-establishment political groups abandoning their efforts to form a coalition over the weekend amid a dispute with the country's head of state.

In Spain, the IBEX-35 index gave up 2.5 percent to end at 9,521.30, as traders fretted about the future of Rajoy's government.

Europe's banking index led the declines, off nearly 3.2 percent, on track for its worst day since August 2, 2016. Spanish lenders Banco Santander and Caixabank and Italian lender Unicredit were among the worst performers in the sector.

Looking at individual stocks, Dixons Carphone tumbled to the bottom of the European benchmark after it issued a profit warning. The British retailer said profit would fall by 21 percent in the current year, with 92 standalone stores also set to close. Its shares were more than 20.7 percent lower on the news.