LONDON/MILAN: European shares retreated on Tuesday amid disappointing corporate earnings and worries over a snap election in Italy that put Milan on track for its worst day since an inconclusive March general election.
The pan-European STOXX 600 index was down 0.6 percent at 0910 GMT, with Italy's FTSE MIB down 2.3 percent as the chances of an early election grew, reviving worries of political turmoil in the euro zone's third-largest economy.
Italian banks took the most off the index, losing 2.5 percent. State-controlled oil major Eni was down 2.1 percent.
"It's not a good day for Italian assets. Markets are starting to feel the pressure of elections," said Carlo Franchini, head of institutional clients at Italy's Banca Ifigest.
President Sergio Mattarella called on Monday for Italy's bickering parties to rally behind a "neutral government." Italy's two largest parties, the far-right League and anti-establishment 5-Star Movement, opposed that idea, raising the likelihood of an immediate return to the polls.
The Italian stock market has outperformed its European peers this year, but a number of analysts warned that political risk was not priced into the market. On Monday, the FTSE MIB ended at its highest since October 2009.
Elsewhere in Europe, first-quarter corporate earnings and mergers and acquisitions prompted sharp individual price moves while investors prepared for Donald Trump's decision on whether to withdraw the US from the Iran nuclear agreement.
The announcement is expected after market close and could disrupt global oil supplies. Crude's prices are just near their highest in more than three years.
Shares in Danish hearing aid maker William Demant were the worst performer of the STOXX, falling 9.2 percent after warning that lower demand would weigh on sales.
German postal and logistics group Deutsche Post DHL missed first-quarter profit expectations and saw its shares fall 6.1 percent.
Earnings also missed forecasts at staffing group Adecco , and its shares fell 5 percent.
Unilever posted the best performance, rising 2.5 percent as it announced a 6 billion-euro share buyback.
In London, mergers and acquisitions help lift the FTSE 0.1 percent.
Shire added 4 percent after Takeda Pharmaceutical said it agreed to buy the group for 45.3 billion pounds ($61.50 billion).
Shares in Virgin Money rose as much as 9 percent after the British bank said it had received an all-share takeover offer by rival CYBG, valuing it at about 1.6 billion pounds.
Sky was down 1.5 percent after US cable operator Comcast formally notified the European Commission of its intention to bid for Britain's pay-TV group.
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