European stocks fall on lingering credit fears

European stocks dropped one percent in early trade on Monday, adding to last week's sharp losses as persistent concerns over a credit crisis weighed on banking shares.

Shares in French bank Societe Generale tumbled 5.6 percent after it launched a rights issue at a steep discount.

At 0810 GMT, the FTSEurofirst 300 index of top European shares was down 1 percent at 1,288.91 points. The index lost 3.7 percent last week, hit by fears of a U.S. recession as well as worries that financial institutions have not yet revealed the full impact of the credit crisis on their books.

"Spreads are widening again in credit markets and that means the market anticipates a very gloomy scenario," said Romain Boscher, head of equity management at Groupama Asset Management, in Paris.

Energy shares were among the few stocks on the rise, gaining ground along with crude oil prices. Total gained 0.5 percent and Royal Dutch Shell rose 0.9 percent.