European stock markets put in a mixed performance on Tuesday as uncertainty about the strength of the continent's banks continued to unsettle investors.

After recovering some of Monday's losses in early trading, most major indexes slumped amid rumours that major British banks had sought a financial injection from the government.

In Frankfurt, Germany's blue chip DAX slipped back to 5,385 at noon, a loss of 0.1 per cent from Monday after beginning the morning 1.63 per cent higher.

Financial institutes were among the losers, led by Commerzbank, which was 13.1 per cent down at 10.34 euros. Deutsche Bank, Germany's biggest, was off 9.9 per cent at 43.10 euros.

Troubled property lender Hypo Real Estate, which is subject of a 50-billion-euro (68-billion-dollar) bail-out after running into liquidity problems, lost 5.3 per cent to stand at 4.45 euros.

Another loser was software giant SAP, whose share price dropped 10.1 per cent to 25.92 euros after the company issued a profit warning on Monday.

"The mood remains cautious," one trader said.

London's FTSE 100 index shed early gains of more than 2 per cent, following Monday's dramatic 8-per-cent slump, which represented the largest one-day percentage decline since 1987.

At noon the FTSE was 0.14 per cent lower at 4,582 as banking shares again took a beating, with Royal Bank of Scotland (RBS) losing 32 per cent and HBOS down 16 per cent.

Bucking the trend was the Paris bourse. One day after suffering the largest single-day loss in its 21-year-history, the benchmark CAC 40 was trying to rebound.

Near mid-day, the CAC 40 was up 0.87 per cent, to 3,744.32, with advancing issues outpacing losers by 3 to 2.

French-Belgian financial services group Dexia again led the declining issues, down 8.9 per cent, at 6.20 euros.

Early Tuesday, former Belgian prime minister Jean-Luc Dehaene was named head of the company's board of directors and French banker and BNP Paribas executive Pierre Mariani became Dexia's chief executive.

Winners were led by drinks giant Pernod Ricard, which gained 3.9 per cent, to 52.71 euros. French bank BNP Paribas, which on Monday purchased the banking and insurance giant Fortis, was up 1.01 per cent, to 68.18 euros.

The main index on the Amsterdam stock exchange, the AEX, was down 0.54 per cent - at 11:30 am but remained volatile throughout the morning.

Opening with a gain of 2.4 per cent, the index slipped to a low of 306.78 points at 10:30, to recover slightly one hour later.

Bank and insurance company ING Group was the biggest loser, slipping 5.78 per cent.

Iceland's financial regulator on Tuesday took control of the country's second biggest bank, Landsbanki, which was teetering on the verge of collapse as a result of the credit crunch.

Russia provided Iceland with a 4-billion-euro credit in a bid to help the country ride out the crisis in its banking sector.