Europe stocks retreat as U.S. stocks poised to dip

European stocks fell on Monday afternoon, surrendering early gains as U.S. stock index futures pointed to a drop on Wall Street after recent lofty gains.

Mining shares — among the best performing stocks in Europe so far this year — led the retreat while banks trimmed hefty gains.

At 1255 GMT, the FTSEurofirst 300 index of top European shares was down 0.6 percent at 766.60 points.

BHP Billiton was down 2.9 percent, Anglo American was down 1.4 percent and Rio Tinto tumbled 9.4 percent.

Futures for the S&P 500 were down 1 percent, Dow Jones futures fell 0.9 percent and Nasdaq 100 futures were down 1.2 percent.

Banks were under pressure after veteran analyst Mike Mayo of Calyon initiated coverage on several large U.S. banks with an "underperform" or "sell" rating, citing increased problem loans and the government's ability to resolve them, according to FlyOnTheWall.com.

Credit Suisse was down 6.6 percent, UniCredit fell 1.9 percent and Deutsche Bank was down 2 percent.

European banking shares had started the session in the positive territorry, helped by a robust response to as HSBC's massive rights issue. HSBC was still up 2.1 percent in afternoon trading.

Auto stocks were also on the downside, trimming recent sharp gains. BMW dropped 4.4 percent and Peugeot shed 4.2 percent.

The FTSEurofirst 300 index of top European shares is down 7.9 percent in 2009, hit by worries over a sharp global economic downturn as well as fears over the credit crisis. However, Europe's benchmark index has surged 19 percent since hitting a bottom on March 9.