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By Emily Horton

Europe's markets were down on Wednesday, as escalating geopolitical tensions between Pakistan and India heightened investor fears.

Markets were also waiting for the second summit between President Donald Trump and North Korean leader Kim Jong Un to kick off in Vietnam's capital.

Metro Bank PLC tumbled by 20%.

How are markets performing?

The Stoxx Europe 600 lost 0.5% to 371.61 after it finished up 0.4% on Tuesday.

The FTSE 100 was the region's biggest decliner, falling 0.7% to 7,097.77. London markets were hit by a stronger pound after Theresa May managed to reassure investors over the Brexit issue on Tuesday. Since many FTSE 100 stocks earn substantial revenues outside the country, strength in the U.K. currency can hurt the index.

The German DAX (DAX) followed just behind, dropping 0.6% to 11,465.45, while France's CAC 40 and Spain's IBEX 35 both lost around 0.4%, to 5,219.98 and 9,181.60 respectively.

Italy's FTSE MIB index fell the least in the region, dropping by 0.2% to 20,428.85.

The pound remained strong from Tuesday's rally, fetching $1.3271 from $1.3252 late in New York on Tuesday. Meanwhile, the euro remained mostly flat at $1.1392.

What's driving the markets?

Geopolitical tension between Pakistan and India has strongly impacted equities across Europe, as Pakistan reportedly (https://www.bbc.co.uk/news/world-asia-47383634) shot down two Indian Air Force jets, with investors fearing further escalation.

The second summit between President Donald Trump and North Korean leader Kim Jong Un is set to kick off in Hanoi on Wednesday. The two leaders first met in June 2018 in Singapore, where a denuclearization agreement was signed by both parties.

Trump and Kim will have a private dinner Wednesday evening and discussions on Thursday in hopes of building on the agreement made eight months ago, given that little progress has been made toward disarmament since.

Meanwhile, the House voted to block the White House from redirecting federal funds toward building a border wall, heightening the chances of Trump exercising his veto power for the first time, The Wall Street Journal reported (https://www.wsj.com/articles/house-set-to-pass-measure-blocking-trumps-national-emergency-on-wall-11551185964).

What stocks are active?

Metro Bank PLC (MTRO.LN) was Europe's biggest loser, plunging 20% on Wednesday, after it reportedly (https://www.bloomberg.com/news/articles/2019-02-26/metro-bank-is-said-to-weigh-up-to-400-million-pound-share-sale) disclosed that a British regulator was investigating how the bank misclassified assets.

Air France-KLM (AF.FR) lost 12% after the Dutch government announced a surprise decision to buy a stake in the airline, which prompted fears that competing national agendas could interfere with the company's latest efforts to streamline the business, Bloomberg reported (https://www.bloomberg.com/news/articles/2019-02-26/dutch-government-buys-air-france-klm-stake-aims-to-match-france).

Meanwhile, supermarket Marks & Spencer Group PLC (MKS.LN) lost 8%, after it announced a new joint venture (http://www.marketwatch.com/story/marks-spencer-ocado-form-new-joint-venture-2019-02-27) with online delivery service Ocado Group PLC (OCDO.LN), which added 1% on the news.

"This deal is a case of the old meeting the new. M&S has clearly decided if you can't beat them, join them, and in a digital age it simply can't afford to ignore the online audience for food," said Laith Khalaf, a senior analyst at U.K. stockbroker Hargreaves Lansdown.

"M&S basket sizes are small, under GBP30, which makes the economics of online delivery especially challenging, because customers are shopping for special occasions or food for that night, rather than a full weekly grocery shop. By teaming up with Ocado, where basket sizes are over GBP100, that makes an online proposition viable", Khalaf added.

Leading the heavyweight miners, Rio Tinto PLC (RIO.LN) gained almost 2%, after it announced it would pay a special dividend as profits jumped (http://www.marketwatch.com/story/rio-tinto-to-pay-special-dividend-as-profit-jumps-2019-02-27).

(END) Dow Jones Newswires

February 27, 2019 07:13 ET (12:13 GMT)

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