European shares drop, weighed by Chinese stocks

                                
 * FTSEurofirst 300 falls 0.7 percent from 10-month high
                                
 * Chinese stocks drop weighs on leading European index
                                
 * Banks drop; London markets closed for holiday
                                
 * For up-to-the-minute market news, click on [STXNEWS/EU]
                                
 
                                
 By Christoph Steitz
                                
 FRANKFURT, Aug 31 (Reuters) - European shares fell in
morning trade on Monday, with the leading index tracking sharp
losses in Chinese stocks, while investors expected a quiet
trading session as London markets are closed for a holiday.
                                
 At 0824 GMT, the FTSEurofirst 300 <.FTEU3> index of top
European shares was down 0.7 percent at 971.88 points after
reaching a 10-month high on Friday.
                                
 The index has plunged 45 percent in 2008, but is up 17
percent this year, soaring 50.5 percent since reaching a
lifetime low in early March.
                                
 "The drop in China does have an impact and there is further
downside potential in those overvalued stocks," said
Giuseppe-Guido Amato, strategist at Lang & Schwarz.
                                
 Shanghai-listed shares <.SSEC> fell 6.7 percent and the
index also crucially dropped below the 125-day moving average,
which is viewed by many domestic investors as the threshold for
bear and bull markets. [ID:nSP486633]
                                
 "It's really all about how fundamental that correction will
be. If it spreads from equities, that would be bad for stocks
here," Amato added.
                                
 Banks took most points off the FTSEurofirst 300, with BNP
Paribas <BNPP.PA>, Deutsche Bank <DBKGn.DE>, Commerzbank
<CBKG.DE> and Credit Suisse <CSGN.VX> down between 1.3 and 3.3
percent.
                                
 Pharma and biotech stocks also weighed and the DJ STOXX
Chemicals Index <.SX4P> was the second-biggest sectoral loser,
down 1.5 percent.
                                
 
                                
 BAYER FALLS
                                
 German Bayer <BAYG.DE> dropped 1.5 percent. Unlisted
competitor Boehringer Ingelheim on Sunday released positive
results about one of its drugs which rivals Bayer's Xarelto.
[ID:nLT462532] [ID:nLT444241] [ID:nLU620986]
                                
 The DJ STOXX European Auto Index <.SXAP> was the top
sectoral loser, down 1.9 percent, and Volkswagen <VOWG.DE> and
Porsche <PSHG_p.DE> were down 1 and 1.4 percent, respectively.
                                
 The roughly 370,000 employees of Volkswagen and Porsche plan
to take a stake of up to 5 percent in the automotive group, VW's
labour chief Bernd Osterloh told German newspaper Sueddeutsche
Zeitung in an interview. [ID:nLT732067]
                                
 Austria's Strabag <STRV.VI> advanced 2.8 percent after the
builder released better-than-expected second-quarter results,
also confirming its 2009 forecast. [ID:nLV181952]
                                
 "Later on some top down data for Europe and the U.S. might
be setting the tone," Heino Ruland, strategist at Ruland
Research, wrote in a note.
                                
 This will include euro zone flash estimate for August
inflation, due at 0900 GMT, as well as the U.S. Chicago PMI for
August, due for release at 1345 GMT.
                                
 Across Europe, Germany's DAX <.GDAXI> and France's CAC 40
<.FCHI> fell 0.9-1.2 percent.
 (Additional reporting by Sylvia Westall in Vienna; Editing by
Mike Nesbit)