European stocks fall in early trade; UBS rises

European stocks fell in early trade on Tuesday, snapping a two-session rally, with mining and energy shares retreating as metal prices tumbled and oil broke below $114 a barrel driven by the U.S. dollar's gains.
UBS rose 3%, reversing early losses, as the stricken Swiss bank unveiled a plan to break up its business into autonomous units and posted a worse-than-expected quarterly loss.
The news failed to boost banks, with BNP Paribas down 2.6%, BBVA down 1.4% and Barclays down 1.6%.
At 0820 GMT, the FTSEurofirst 300 index of top European shares was down 0.7% at 1,204.93 points. The index gained 1.2% on Monday, ending at a six-week closing high.
Oil and gas producers were among the largest individual drags on the broader market. Total lost 0.4%, Royal Dutch Shell fell 0.3%, while among metal and mining companies, ArcelorMittal fell 1.9% and Xstrata shed 2.5%.
"Overall, the sentiment is not bad for stocks as commodities retreat, but appetite for some metal and energy shares is falling a bit," said Rik Zwaneveld, trader at AFS Brokers, in Amsterdam.
U.S. crude oil futures fell $1 to $113.45 a barrel as the rally in the dollar eclipsed worries over possible supply disruptions due to the Russia-Georgia conflict.
The euro fell to a six-month low against the dollar on Tuesday on growing concern that Europe is headed for a sharper economic downturn than the market had first anticipated.
Copper prices fell to their lowest in over six months, hit by the dollar and demand worries.
"(The drop in oil) is absolutely vital in terms of sentiment. The big fear for the market continues to be inflation and a lower oil price reduces the risk of inflation and the effect of that. It gives central banks room to manoeuvre," said Henk Potts, strategist at Barclays Stockbrokers in London.
Around Europe, Germany's DAX index was down 0.7%, Britain's FTSE 100 index down 0.7% and France's CAC 40 down 0.7%.
Despite the rise on Tuesday, UBS stock is still down 49% this year, compared with a 27% fall in the DJ Stoxx banking index.
UBS, admitting there were problems with its one-bank model said it would split its wealth management business from investment banking.
The embattled bank said there had been net new money outflows of almost 44 bln Swiss francs ($41 bln) as customers fled — compared with inflows of 34 bln francs a year earlier — and wrote down an additional $5.1 bln in assets related to U.S. residential real estate and other structured credit positions.
"The UBS news is really another sign that the situation remains quite bad in the financial sector, so that won't improve sentiment on banks," AFS Brokers' Zwaneveld said.
On the upside, Celesio rose 6.7% as analysts said the worst could be over after Europe's biggest drug distributor issued a profit warning for this year due to prolonged tough competition and a price war in its key markets.
Beiersdorf gained 4.7% after Goldman Sachs upgraded the German maker of Nivea cream to "buy" from "neutral" and added it to its "conviction buy" list.