By Kit Rees
LONDON (Reuters) - Britain's benchmark share index fell to a two-week low on Tuesday as the heavily weighted banking and energy sectors dropped, although motor insurer Direct Line (L:DLGD) jumped after results.
The blue-chip FTSE 100 index (FTSE) ended down 0.7 percent at 6,645.4 points, its lowest level since mid-July, as the bank sector extended losses after the results of Europe-wide stress tests. Britain's banking index (FTNMX8350) fell 1.5 percent.
Barclays (L:BARC) and Royal Bank of Scotland (L:RBS), which were among the worst-performing banks in the stress test, ended down 3.6 percent and 1.8 percent respectively.
"The recent stress tests have sent bank shares plummeting for a second day," CMC Markets analyst Jasper Lawler said.
Analysts said UK banks were also being affected by drops in Credit Suisse (S:CSGN) and Deutsche Bank (DE:DBKGn), which were relegated from the blue chip STOXX Europe 50 index (STOXX50), and by Commerzbank (DE:CBKG) falling after a profit warning.
Shares in oil major Royal Dutch Shell (L:RDSa) also dropped after HSBC cut its price target on the stock while Liberum analysts downgraded Shell to "hold" from "buy".
However, Direct Line surged 12.6 percent (L:DLGD) - its strongest one-day performance on record - after its half-yearly profits beat expectations.
The FTSE 100 is up about 7 percent so far in 2016, although the value of UK shares in U.S. dollar terms has been hit by a slump in sterling following Britain's vote in June to quit the European Union.