European stocks extend losses, Porsche drops six per cent

European stocks were down yesterday morning, falling for a third straight session dragged lower by banking and oil stocks, while volumes were expected to be thin with UK markets closed for a holiday.

Porsche was among the biggest losers, falling six per cent after Volkswagen confirmed media reports that it loaned €700 million to Porsche to help with its finances.

Porsche declined to comment.

At 0829 GMT, the FTSEurofirst 300 index of top European shares was down 0.6 per cent at 850.89 points, after edging higher in the first minutes of trading.

The index, up 2.2 per cent on the year, has risen 32 per cent since reaching a record low in early March, but the sharp rally started to lose steam last week, dented by growing worries over mounting government debt.

"The recent optimism on the markets has been excessive,"

Joost van Leenders, strategist at Fortis Investments wrote in a note.

"The deleveraging process is far from over and governments are facing rising deficits."

On the macro side, weaker-than-expected readings of the German business sector suggested that the nation's firms continue to struggle.