European stocks fell in early trade on Wednesday, losing ground for the third straight session and mirroring sharp losses on Wall Street and in Asia, with financial shares among the hardest hit.
At 0812 GMT, the FTSEurofirst 300 index of top European shares was down 1.1 percent at 944.05 points. The benchmark index, which shed 1.8 percent on Tuesday, is up 46 percent since reaching a floor in March.
The DJ STOXX European banking index was down 2.1 percent on Wednesday, with Banco Santander down 3 percent, UniCredit down 2 percent and Barclays down 2.8 percent.
Insurers also got hit, with Aegon down 5.2 percent, Swiss Re down 5.3 percent and ING down 5 percent.
U.S. stocks dropped 2 percent on Tuesday, dragged lower by renewed worries over the health of U.S. financial institutions, as well as concerns that the sharp stock market rally since early March has got ahead of the global recovery.
"The rebound from March has been remarkable. Year-to-date gains for most of the indexes are strong, although we are still below pre-Lehman Brothers levels," said Valerie Plagnol, chief strategist at CM-CIC Securities in Paris.
"But the glass is still half empty. Macro data has improved, but we're in a pattern of destocking-restocking, and the outlook for consumer spending is still grim."
DEFENSIVES INCH HIGHER
Stocks seen as defensives such as pharmas and telecoms eked out gains as investors' risk appetite fell.
Sanofi-Aventis gained 1.5 percent, Vodafone rose 0.2 percent and GlaxoSmithKline added 0.7 percent.
The VDAX-NEW volatility index, a measure of investor risk appetite or aversion, was up 2.9 percent, after a 5.5 percent rise in the previous session. The U.S. CBOE Volatility Index jumped 12 percent on Tuesday, hitting its highest level since early July.
"It shows how fragile sentiment can still be as the market was awash with rumours about various U.S. institutions," said Arifa Sheikh-Usmani, equity trader at Spreadex in London.
Resource-related shares felt the pinch from lower commodity prices, with Rio Tinto down 2 percent, Xstrata down 3 percent and Repsol down 1.9 percent.
Around Europe, UK's FTSE 100 index was down 0.8 percent, Germany's DAX index down 1 percent, and France's CAC 40 down 1 percent.
On the macro front, investors will keep an eye on U.S. monthly ADP employment data, due at 1215 GMT, that could give clues to the key U.S. payrolls figures expected on Friday.
