ATHENS (Reuters) - Greece's banking stocks plunged for the second day in a row on Tuesday, holding down the main Athens index which otherwise turned the corner after the previous day's record rout.
Nineteen of the exchange's 25 blue-chip stocks rose on the day, and the main index .ATG, of which around 20 percent is banks, was down only 1.2 percent.
Officials said they expected the coming days would see trading calm down.
With lenders in dire need of recapitalization after a flight of euros from deposits for most of this year, the banking index .FTATBNK closed down more than 29 percent, effectively at its 30 percent daily loss limit at which trading is halted. It was at that limit on Monday.
Many non-financial sector indexes gained on Tuesday. The blue chip retail sector .FTATRET, for example, was up more than 11 percent, driven by a similar rise in its main component, international jewelry chain Folie Folie (HDFr.AT).
The gains in non-financials suggested that historically low valuations were attracting investors and that fears of further turmoil between Greece and its international lenders were primarily consigned to banks.
"The second day of trading showed clear signs we are moving towards a normalization of the market after the long shutdown," said Socrates Lazaridis, chief executive officer of Hellenic Exchanges.
The main index lost 16.2 percent, around 8 billion euros in value, on Monday, the first day of trading after a five-week shutdown taken as a protective measure as indebted Greece sought to hang on to euro zone membership.
There was no spillover evident from Greece's bank woes to other European markets. Many investors have cut their exposure to Greece and are focusing more on the state of core markets such as Germany and France.
Even with Tuesday's non-bank gains, stocks have fallen to roughly the level they were at in 1990 and, while not as low as they were in 2012, are some 52 percent down on last year's high.
"Logically the market should be close to bottoming out at these levels after such a fall. Banks have been a drag on the benchmark index, given dilution fears in view of their need to recapitalizes," said Costis Morianos, head of Athens-based Asset Wise Capital Management.
Athens is in new bailout talks with its European Union partners and the threat of political and economic instability remains high.
There have, however, been signs of progress.
Greece said it expects to conclude a bailout deal with international lenders by Aug. 18, with the drafting of the accord starting on Wednesday. Its finance minister went further:
"Everything will be concluded this week," Euclid Tsakalotos told reporters after meeting representatives of the International Monetary Fund, the European Commission, the European Central Bank and the euro zone's rescue fund, the European Stability Mechanism.
He did not elaborate and it was not immediately clear what level of agreement he was referring to.
It has been estimated by both the banks themselves and the creditors that between 10 billion and 25 billion euros ($11 billion-27.5 billion) is needed to recapitalizes Greek banks.
The economy, meanwhile, has reversed course and is heading back into recession.
The European Commission says it will shrink by 2 to 4 percent this year, a return to the recession that plagued Greece for six years until 2014.
A survey on Monday showed Greek manufacturing activity plunged to a record low as new orders plummeted and the three-week bank shutdown caused serious supply problems.
At the same time, Greece's economic sentiment hit its lowest in almost three years in July, a monthly report by the IOBE think tank said.
($1 = 0.9108 euros)
Editing by Raissa Kasolowsky