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LONDON, May 29 (Reuters) - European shares slumped for a second day on Tuesday as investors took flight on renewed fears of euro zone break-up risk as Italy embarked on a new election campaign which could become a proxy referendum on euro membership.
Italy’s main stock index sank to a 9-month low in early deals, down 1.6 percent by 0725 GMT.
Italian bank stocks slumped another 2.5 percent, having lost 4 percent in the previous session, bruised by a sell-off in government bonds, a core part of the banks’ portfolios.
Intesa Sanpaolo, BPER Banca, Unicredit and UBI Banca fell sharply, down 3.4 to 3.7 percent, while Poste Italiane also tumbled 4.5 percent.
Reawakened anxieties over a potential collapse of the euro zone caused Sentix’s euro zone break-up index to climb to its highest since April 2017, when investors feared a eurosceptic Le Pen presidency in France.
The pan-European STOXX 600 fell 0.8 percent, with banks the worst-performing. The euro zone’s banks index sank 2 percent and was on track for its biggest monthly drop since the Brexit vote in June 2016.
The stress in Italy spread to other peripheral euro zone markets, with Spanish and Portuguese bank stocks firmly in the firing line.
Banco Comercial Portugues fell 4.5 percent, while Spain’s Santander led the IBEX down with a 3.1 percent drop.
British retailer Dixons Carphone plunged 21 percent after a profit warning. The new chief executive warned the company needed to close stores at a time of a contracting UK electrical market. (Reporting by Helen Reid; editing by Danilo Masoni)