PARIS: European stocks were flat on Tuesday after struggling for direction amid lingering fears of a deeper crisis brought on by the collapse of Credit Suisse and two US banks.

The continent-wide STOXX 600 index closed flat, after rising as much as 0.8% during the day.

The European Central Bank’s top supervisor was concerned that the recent selloff in Deutsche Bank shares last week showed investors were on edge and could be spooked by moves in the small market for credit default swaps (CDS).

The German bank dropped nearly 2% on Tuesday, following a near 9% drop last week after its cost of insuring debt against default risk jumped to an over four-year high. “Question is now how much is renewed recession fear going to be a bigger worry on the (banking) sector than it has been,” said Chris Beauchamp, chief market analyst at IG Group.

While the European banks index edged up 0.7% on Tuesday, paring much of its gains, it was on track for its worst monthly showing since March 2020, when financial markets were roiled by pandemic fears.

Swiss bank UBS climbed 1.7% after CEO Ralph Hamers said the bank saw its government-orchestrated takeover of Credit Suisse as a growth opportunity, in an internal memo seen by Reuters. Credit Suisse shares rose 0.7%. On the other hand, the STOXX 600 is set to end the March quarter with a near 5% gain on signs of economic resilience and hopes that major central banks were nearing the end of their monetary tightening cycles.

Meanwhile, real estate stocks took the hardest hit and slid 2.7%, touching a five-and-a-half-month low.

Worries have surfaced that commercial property could be the next shoe to drop if problems in global banking markets trigger a broader credit crunch for the multi-trillion-dollar sector, with Citigroup on Monday warning the potential downside for the sector could exceed 50%.