European stocks extend losses; Porsche drops 6 pct

                                
 * FTSEurofirst 300 loses 0.6 pct, down for 3rd day in a row
                                
 * Porsche drops 6 pct after receiving loan
                                
 * Arcandor tumbles 20 pct as CEO says firm needs state aid
                                
 * For up-to-the-minute market news, click on [STXNEWS/EU]
                                
 
                                
 By Blaise Robinson
                                
 PARIS, May 25 (Reuters) - European stocks were down on
Monday 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 <PSHG_p.DE> was among the biggest losers, falling 6
percent after the luxury automaker confirmed media reports that
it received a 700 million euros ($979.7 million) loan to help
with its finances.
                                
 At 0829 GMT, the FTSEurofirst 300 <.FTEU3> index of top
European shares was down 0.6 percent at 850.89 points, after
edging higher in the first minutes of trading.
                                
 The index, up 2.2 percent on the year, has risen 32 percent
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.
                                
 Germany's Ifo said that its business climate index came in
at 84.2, lower than forecasts for 85.0. The reading for current
conditions was 82.5, also lower than expectations for 84.0.
Despite those readings, the expectations index came in at 85.9,
higher than forecasts for 85.5 [ID:nBAE001655].
                                
 The euro <EUR=> fell as low as $1.3959, according to Reuters
data, hitting the day's low. It traded at $1.3985 before the
data was released.
                                
 Investors were also seen trading cautiously after North
Korea said it had successfully conducted a nuclear test.
[ID:nSEO141656]
                                
 Around Europe, Germany's DAX index <.GDAXI> was down 1.4
percent and France's CAC 40 <.FCHI> was down 1.2 percent.
                                
 French building material group Saint-Gobain <SGOB.PA> lost
2.9 percent. Two bankers told Reuters that the company was
seeking a 2 billion euro refinancing loan. No one at
Saint-Gobain was available for comment.
                                
 Germany's Arcandor <AROG.DE> shed 20 percent after its CEO
Karl-Gerhard Eick and Chairman Friedrich-Carl Janssen reiterated
the need for state aid to ensure the survival of the company in
interviews with Frankfurter Allgemeine Sonntagszeitung and Der
Spiegel.
                                
 U.S. markets were also closed on Monday for Memorial Day.
                                
 Wall Street dropped for a fourth consecutive session on
Friday on persistent worries about the budget deficit, with
Treasuries and the dollar losing ground.
                                
 European shares ended lower on Friday, further cooling a
rally that has added a third to stock prices in the past 10
weeks, as defensives and Swiss stocks weighed.
 (Editing by Hans Peters)