UPDATE 2-Europe stocks post worst day of the year; Tobacco firms weigh

* BATS post worst session in a year

* AMS slumps 13% on reports it lost some Apple business

* Danske Bank slides on U.S. lawsuit

* IBEX down 3%, worst session since December (Updates to close)

By Sruthi Shankar and Susan Mathew

April 20 (Reuters) - European shares lost nearly 2% on Tuesday, after hitting record highs a day earlier, as tobacco companies weighed on London stocks and many regional indexes edged off pre-pandemic highs.

British American Tobacco BATS.L and Imperial Brands IMB.L fell more than 7% each following a report the Biden administration was considering requiring tobacco companies to lower the nicotine levels in all cigarettes sold in the United States. shares recorded their biggest percentage drop since March 2020.

Britain's blue-chip FTSE 100 .FTSE fell 2% and logged its sharpest percentage decline in two months, while Germany's DAX .GDAXI was down 1.6%. Spain's IBEX .IBEX dropped 2.9% for its worst session since December.

The pan-regional STOXX 600 index .STOXX dropped 1.9% in its biggest one-day decline this year, accelerating losses after a lower opening on Wall Street. .N

After bumper earnings reports from U.S. banks last week, investors are awaiting results from mega-cap technology firms, which helped a strong U.S. market recovery last year but have lagged recently.

In Europe, profits for STOXX 600 companies are expected to jump more than 55% in the first quarter, according to Refinitiv IBES data, with much of the support coming from consumer cyclical and industrial companies.

"It's earnings and results have been fantastic, but it's starting to come at the higher end, so people are starting to think there is no more upside, how much better can it get," said ETX Capital analyst Michael Baker regarding the day's pull-back.

BMW's BMWG.DE first-quarter earnings on Tuesday showed a much stronger bounce back than expected, helped by higher prices and strong Chinese demand. STOXX 600 has hit a series of all-time highs this month and climbed about 9% so far in 2021, broadly in line with New York's S&P 500 .SPX .

All major indexes in Europe ended the day in the red. Travel & leisure .SXTP , banks .SX7P and insurers .SXIP fell after strong gains this year.

Austrian sensor specialist AMS AMS.S slumped almost 13% after traders cite a media report that the company has lost some Apple AAPL.O business. Bank DANSKE.CO lost 7.6% after the United States and the Federal Retirement Thrift Investment Board filed a claim for compensation against the Danish bank and its former chief executive Thomas Borgen. food group Danone DANO.PA slipped 1.8% after reporting a 3.3% fall in first-quarter sales as lockdowns continued to dent its bottled water and baby food sales.