* Italy’s FinecoBank dives, UniCredit mulls further stake sale
* European Commission expects slower growth in Italy this year Milan-traded stocks reverse course, slide 0.9 pct
* Rate-sensitive real estate stocks rise 1.1 pct, banks slide
* German industry order rebound weaker than expected (Updates after the close, recasts, adds quotes)
By Aaron Saldanha
May 7 (Reuters) - European shares slid on Tuesday as risk appetite took a hit from the European Commission trimming euro zone growth forecasts and pessimism among investors on the path ahead for U.S.-China trade talks.
The European Commission now expects euro zone growth of 1.2 percent in 2019 and halved this year’s growth forecast for Italy to 0.1 percent. Meanwhile, a spokesman for China’s foreign ministry said mutual respect was the basis for reaching a trade deal and adding tariffs could not solve any problem.
The pan-European STOXX 600 index slid 1.4 percent on its worst day in three months, while the volatility gauge on euro zone blue-chips hit its highest in more than six weeks before dipping marginally.
“While we have seen a continued focus on weaker growth in China as a result of these trade talks, Europe is also feeling the contagion effects of such a slowdown,” Joshua Mahony, senior market analyst at IG, wrote in a note which cited the forecasts.
“Germany remains the most important EU casualty of the recent breakdown in growth and trade.”
Italian stocks gave up early gains and fell 0.9 percent, while their London-traded peers slid 1.6 percent as investors returned from a long weekend.
Germany’s trade-exposed DAX also slid 1.6 percent. German industrial orders rose less than expected in March, data showed.
Bank shares tumbled 2.4 percent on their worst day in close to five months.
Milan-listed FinecoBank fell the most on the sector index, down 7.5 percent, as top Italian lender UniCredit said it was considering cutting its stake in the online broker.
“The timing is a little surprising and may reignite concerns that UniCredit are still facing upwards pressure of capital requirements. However, this decision does seem more strategic than forced,” said Russell Quelch, financials analyst at Redburn.
David Grinsztajn, senior banking analyst at AlphaValue, said there was no strong correlation now between growth and lenders’ asset quality, probably due to low interest rates. So, the cuts in the European Commission’s growth expectations would not have a prolonged impact on banking stocks, he predicted.
Oil and gas stocks dived 2.5 percent, against a backdrop of a 1.6 percent slide in Brent futures on renewed doubts over U.S.-China trade talks.
Tariff-sensitive stocks of auto-makers and their suppliers fell 1.4 percent. BMW dropped 2.3 percent on reporting a sharp slide fall in quarterly operating profit, on a hit from higher investment spending and a legal provision.
Defensive real estate stocks, which generally move in the opposite direction to interest rates, gained 1.1 percent. Germany’s Vonovia tacked on 5.2 percent after boosting its full-year profit guidance. (Reporting by Aaron Saldanha, Medha Singh and Agamoni Ghosh in Bengaluru; Helen Reid in Londonl; editing by John Stonestreet and Gareth Jones)