European stock markets fell sharply on Tuesday on renewed doubts about the strength of the global recovery, with banks hit by a major shakeup in Britain and another big loss at Swiss giant UBS.

But analysts said some of the losses were offset late in the trading day after the US Commerce Department reported a better-than-expected gain in US industrial orders.

Orders rose 0.9 percent from September after an 0.8 percent fall in August. Analysts had foreseen a rise of 0.8 percent last month.

Late-day sentiment was also supported by news of a takeover bid by billionaire investor Warren Buffett's Berkshire Hathaway for the Burlington Northern Santa Fe railway company.

Buffett said the acquisition of 77.4 percent of shares in BNSF he does not already own would be Berkshire's biggest acquisition and represented "an all-in wager on the economic future of the United States."

The offer values the rail operator at 44 billion dollars.

But the US developments were unable to drive European markets into positive territory at the close, notably in light of an announcement from UBS of Switzerland that it had fallen deeper into loss during the third quarter.

The bank said its net loss for the three months to September was 564 million francs, its performance largely hit by credit charges.

In London, the FTSE 100 index gave up 1.32 percent to close at 5037.21 points while in Paris, the CAC 40 shed 1.52 percent to 3584.25 points. The Frankfurt Dax lost 1.93 percent to close at 5353.25 points.

Elsewhere there were declines of 1.93 percent in Brussels, 1.98 percent in Rome, 0.89 percent in Amsterdam and 1.24 percent on the Swiss Market Index.

US stocks were also under pressure. The Dow Jones Industrial Average was down 0.81 percent to 9710.61 points at midday while the Nasdaq composite had given up 0.52 percent at 2038.48 points.

Bonds weakened. The yield on the 10-year US Treasury bond rose to 3.450 percent from 3.422 percent Monday while that on the 30-year bond climbed to 4.310 percent from 4.268 percent. Bond yields and prices move in opposite directions.

Analysts said investors were also focusing on an interest-rate announcement due Wednesday from the US Federal Reserve.

"Traders may be treading cautiously ahead of tomorrow's monetary policy announcement from the Federal Reserve and before Friday?s labor report, while continuing to contemplate the sustainability of an economic recovery without global stimulus efforts," Charles Schwab & Company analysts said.

Added Patrick O'Hare of Briefing.com: "Buffett's perspective has helped temper some of the negative thoughts ... but it has yet to turn the tide of sentiment altogether as Buffett himself couldn't put a finger on when the pickup in the US will be both robust and sustained."

O'Hare said the market was also on edge after the British government said it would force state-rescued banks RBS and Lloyds Banking Group to sell assets and provide them with capital injections in a massive shake-up of the banking sector.

The British move also weighed heavily on European banking stocks.

"The entire sector was hit," said Jean-Bernard Parenti of SwissLife Gestion Prive.

In London, Lloyds rose 2.74 percent but RBS, which will emerge 84 percent controlled by the state fell 7.04 percent, the day's largest loss on the London Stock Exchange.

Elsewhere in the sector HSBC lost 3.26 percent.

In Paris, Societe Generale gave up 4.36 percent while BNP Paribas lost 4.31 percent.

In Frankfurt, investors fretted over disappointing results from auto maker BMW, which reported an 85.5 percent plunge in operating earnings in the third quarter.

"The third quarter performance was very bad, especially when compared to (rival) Daimler," said an analyst quoted by Dow Jones Newswires.

In Asia on Tuesday, Hong Kong plunged 1.76 percent, the second consecutive day of losses, as investor confidence remained low.

The Japanese stock market was closed for a public holiday.