(RTTNews) - The European markets fell on Tuesday, as banking stocks slipped on growing concerns about the health of the financial sector.

The London interbank offered rate, or Libor, that banks charge each other for borrowing in dollars overnight climbed 157 basis points to 3.94%, the British Bankers’ Association said today.

In a further attempt to stabilize financial markets, the U.S. Federal Reserve said today that it will step into the commercial paper market in order to provide enough liquidity to help corporations properly manage their working capital.

Crude for November delivery rose $1.99 to $89.80 a barrel on the New York Mercantile Exchange, by the time the European markets closed, on investor optimism after a big interest rate cut in Australia and the Fed’s announcement that it would begin buying commercial paper. The contract touched as high as $93.02 a barrel.

The FTSEurofirst 300 index of pan-European blue chips closed 0.14% lower at 1,003.51 points, while the narrower DJ Stoxx 50 index fell rose 0.17% to 2,527.12 points.

Around Europe, the U.K.’s FTSE 100 index rose 0.35% to 4,605.22 and France’s CAC 40 index surged up 0.55% to 3,732.22, while Germany’s DAX index fell 1.12% to 5,326.63.

Banking stocks were among the worst performers again. Royal Bank of Scotland, Britain’s second largest bank, plunged 39.2% on media reports that the company is in talks with the U.K. government about securing more capital. Separately, Standard & Poor’s cut Royal Bank of Scotland’s credit rating for the first time in 10 years, saying the bank is ”less well positioned than some of its major global peers” as it seeks capital.

Media reports said that Royal Bank of Scotland, Barclays and Lloyds TSB are in talks with the government on a recapitalization plan. The three banks were estimated to get at least �45 billion from government in order to strengthen their capital depleted by credit crunch impacts. Barclays slipped 9.2% and Lloyds TSB lost 12.9%.

Royal Bank of Scotland and Barclays said in separate statements that they did not request capital from the government.

Elsewhere, Deutsche Bank, Germany’s largest bank, slid 8.9%, while Commerzbank, the second largest, dropped 14.2%.

SAP, the world’s largest maker of business-management software, slipped 7.3% after brokerages cut share-price estimates for the company.

On the other hand, heavily weighted oil stocks rallied after crude oil prices rebounded. BP, Europe’s biggest oil company, climbed 4.1%, while Royal/Dutch Shell, the second biggest, rose 2.9% and Total, the third biggest, surged up 3%.

Similarly, mining stocks gained on rising metals prices. BHP Billiton, the world’s biggest miner, rose 1.6%, while Anglo American, the second biggest, climbed 3% and Rio Tinto, the third biggest, surged up 1%. Copper miner Antofagasta gained 4.9%.

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Posted in Categories: Australia, Eurozone, Releases, Stocks, UK, USA.

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