Britain's FTSE touches two-week low, Direct Line soars

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* FTSE 100 down 0.5 pct

* Banks extend losses

* Travis Perkins (LSE: TPK.L - news) drops after results

* Direct Line (Other OTC: DIISD - news) set for record daily gain

By Kit Rees

LONDON, Aug 2 (Reuters) - UK shares fell for a second straight session on Tuesday as banking stocks and Travis Perkins dropped, though motor insurer Direct Line jumped after results.

The blue chip FTSE 100 index was down 0.5 percent at 6,658.36 points by 0946 GMT, touching a two-week low.

Shares (Berlin: DI6.BE - news) in bank stocks extended their losses from the previous session following the results of Europe-wide stress tests, with the British banking index down 1.5 percent.

Royal Bank of Scotland (LSE: RBS.L - news) and Barclays (LSE: BARC.L - news) had been among the worst-performing banks in the stress test, with their shares down 3.1 percent and 2.8 percent respectively.

Analysts said that the exclusion of Credit Suisse (LSE: 0QP5.L - news) and Deutsche Bank (LSE: 0H7D.L - news) from the blue chip STOXX Europe 50 index was weighing on sentiment, as well as the slide in Commerzbank (Xetra: CBK100 - news) 's shares following an earnings warning.

Direct Line was the top riser on the index, jumping 7.6 percent and set for its best day on record after its half-yearly profits beat expectations.

"The results ... are set against a very strong comparator and the UK's largest motor insurer strengthened its grip in this key sector with in-force policies up 2.5%," Russ Mould, investment director at AJ Bell, said in a note.

Energy stocks, however, continued their slide, with shares in Royal Dutch Shell (Xetra: A0ET6Q - news) and BP dipping as oil prices remained subdued.

Builders' merchant Travis Perkins fell 3 percent after saying that the UK's June vote to leave the European Union had created "considerably uncertainty" in the outlook for the building supplies market.

The company said its two-year like-for-like sales in July had been below the levels seen in the second quarter, although it had seen a gradual improvement through the course of the month. (Reporting by Kit Rees; Editing by Andrew Heavens)