By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- Banks and resources firms led U.K. stocks to sharp losses on Tuesday, as political paralysis in Italy after its general elections fueled fears of renewed instability in Europe, scaring investors out of risky assets.
The FTSE 100 index lost 1.3% to 6,272.85.
The losses tracked a broader negative risk sentiment across global financial markets.
Italian election results pointed to a fragmented government. Pier Luigi Bersani's center-left bloc narrowly beat Silvio Berlusconi's center-right bloc in the lower house but narrowly missed a majority in the Senate. Both houses are needed to pass legislation, with the murky results fueling worries this could be end of the country's reformist drive.
Risk-sensitive sectors such as banks and resources firms posted the biggest losses.
Barclays PLC (BCS) dropped 3.6%, Royal Bank of Scotland Group PLC (RBS) lost 3.1% and Lloyds Banking Group PLC (LYG) shaved off 2.7%. Sector heavyweight HSBC Holdings PLC (HBC) eased 2.3%.
Among oil firms, BP PLC (BP) fell 1.7%, Royal Dutch Shell PLC (RDSB) erased 1.4% and BG Group PLC shed 1.2%. Oil prices were also lower.
In the mining sector, Vedanta Resources PLC gave up 2.9%, BHP Billiton PLC (BHP) slipped 2% and Rio Tinto PLC (RIO) fell 0.6%. Most metals prices were lower.
Shares of CRH PLC slipped 0.4%. The buildings-materials supplier posted lower pretax profit for 2012 and said it targets further cost reductions.
On an upbeat note, shares of Imperial Tobacco Group PLC (ITYBY) inched 0.6% higher, after the company announced plans to raise dividends 10% a year for the medium term.
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