European shares drop amid political uncertainties in France

The STOXX 600 closed down 0.9%, recording its biggest single-day decline in two weeks, while Italy's and Spain's bank-heavy benchmarks lost 1.9% and 1.6%, respectively

European shares closed lower on Tuesday, with banks across the continent declining as investors speculated about political uncertainties in France while bracing for the U.S. Fed's monetary policy meeting later in the week.

The STOXX 600 closed down 0.9%, recording its biggest single-day decline in two weeks, while Italy's and Spain's bank-heavy benchmarks lost 1.9% and 1.6%, respectively.

Banks led the selloff, with the sector closing down 2.2%, extending declines from Monday.

France's CAC 40 index, down 1.33%, extended losses from the previous session when President Emmanuel Macron called a snap election following a heavy trouncing of his allies in European elections at the hands of the far-right National Rally (RN).

If the RN party gets into power, that would spell bad news for a lot of European projects and for the integrity of the EU, according to Thomas Gehlen, senior market strategist at SG Kleinwort Hambros.

The yield on the French 10-year bond was at 3.2437%, reaching its seven-month highs earlier in the session.

The basic resources index, which includes Europe's biggest mining companies, shed nearly 2% as most metal prices came under pressure from a firmer dollar and concerns over demand in top consumer China.

On the data front, Britain's labour market showed more signs of cooling in April as the unemployment rate rose. London's FTSE 100 closed nearly 1% lower.

The focus will now be on the Federal Reserve's policy decision on Wednesday, which will help markets gauge the timing and the scope of interest rate cuts in the U.S..

Back in Europe, ECB chief economist Philip Lane said the ECB should persist in restraining economic growth given the ample inflationary pressures and wait with its next rate cut until uncertainty recedes.

Among non-financial stocks, Naturgy's plunged more than 14% after Spanish holding firm Criteria dropped its takeover plan with Abu Dhabi's TAQA for the Spanish gas firm.