* European banks down 3% * Novo falls after Trump's comments * BBVA climbs after Sabadell takeover fails (Updated at 0910 GMT) By Sruthi Shankar Oct 17 (Reuters) – European shares tumbled on Friday, on course for their biggest drop in more than two months, as fresh worries about the health of U.S. regional banks hurt shares of lenders globally. The continent-wide STOXX 600 index dropped 1.7% by 0910 GMT, set to wipe out weekly gains. European banks slid 3%, with Germany's Deutsche Bank , the UK's Barclays, Italy's Unicredit and France's BNP Paribas down in the range of 3.3% and 6.5%. U.S. regional banks dropped 6.3% on Thursday after two lenders disclosed loan fraud, driving concerns around credit quality after two recent U.S. auto bankruptcies had put investors on edge about the sector's exposure. The selloff comes more than two years after Silicon Valley Bank's failure, when high rates drove paper losses on its bonds. "Unlike in 2023, the risks appear more isolated this time, but they could feed into a narrative that the U.S. business environment and credit quality are in a poorer state than what data suggests," said ING strategist Francesco Pesole. Absence of U.S. economic data due to a prolonged government shutdown, simmering trade tensions between U.S. and China as well as concerns about stretched valuations in the technology sector have also weighed on investors' minds in recent days. The STOXX 600 was set for a 0.4% weekly drop. Europe's high-flying defence stocks came under pressure after U.S. President Donald Trump and Russian President Vladimir Putin agreed to another summit on the war in Ukraine. The STOXX aerospace & defence index dropped 3.6% to a one-month low. Novo Nordisk fell 6.4% after Trump said the price of the Danish drugmaker's best-selling weight-loss drug would be lowered and that negotiations over price changes would be swift. Spain's BBVA jumped 5.2% after the lender failed to convince Sabadell shareholders to back its 16.32 billion euro ($19.10 billion) hostile takeover bid. BBVA said it would immediately resume shareholder remuneration. Shares of Sabadell fell 7.9%. ($1 = 0.8546 euros) (Reporting by Sruthi Shankar in Bengaluru; Editing by Rashmi Aich and Janane Venkatraman)
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