European shares fell sharply on Monday for the second consecutive day on worries over euro zone debt problems after concerns grew on Friday that a Greek style debt crisis could hit Hungary, with banks the major losers.
By 0850 GMT, the pan-European FTSEurofirst 300 index of top shares was down 1 percent at 988.86 points. The index is down around 11.2 percent from a mid-April peak, on worries the euro zone's debt crisis could derail economic recovery.
Banking stocks extended their falls from the previous session, with the STOXX Europe 600 Banking index down 1.8 percent.
Banks with exposure to Eastern European countries such as Raiffeisen International, Erste Group and UniCredit fell 0.6 to 2.3 percent.
British banks Barclays and Lloyds Banking Group fell 2.2 and 2.9 percent respectively. The Daily Mail said British finance minister George Osborne is planning to slap a punishing new tax on banks.
"The volatility of last week carries on," said Justin Urquhart Stewart, director at Seven Investment Management. "Hungary and its debt situation is adding to the nerves in the market following the U.S. jobs data on Friday."
Markets tumbled in the previous session after comments by the Hungary government suggested that the country might suffer a Greece-style debt crisis.
But the chairman of the Eurogroup of euro zone finance ministers, Jean-Claude Juncker, on Sunday dismissed concerns about Hungary might face a Greek-style debt crisis and said the current level of the euro did not worry him.
"The situation with Hungary is not anything new and the fact that something like that can have such a reaction just shows the nervousness of investors' confidence at the moment. I think the sell-off is over done," Urquhart Stewart said.
BP GAINS
Commodity stocks were under pressure, with crude falling 1.2 percent and metal prices lower on growth demand concerns.
Miners Rio Tinto, BHP Billiton and Anglo American fell 2.1 to 2.8 percent.
BP, however, gained 0.6 percent, extending its rebound from the previous session. It said it expected a second oil containment system would allow it to increase the amount of oil being captured from the spill.
Also on the upside, Adidas gained 1.2 percent after Deutsche Bank upgraded the sporting goods maker to "buy" from "hold" and said it would benefit from the weaker euro.
But the VDAX-NEW volatility index, a gauge of investor risk appetite or aversion, advanced 7.5 percent, hitting a more than one-week high and extending the previous session's 10.3 percent rise.
The higher the volatility index, based on sell- and buy-options on Frankfurt's top-30 stocks, the higher is investors' aversion for risky assets such as equities.
Across Europe, the FTSE 100 index was down 1.1 percent, Germany's DAX slipped 0.8 percent and France's CAC 40 was down 1.1 percent.
Spain's IBEX fell 1.5 percent, Portugal's PSI 20 was down 1.2 percent and Italy's benchmark fell 0.6 percent.
