Recession fears hit Europe shares; VW soars 90 pct

* FTSEurofirst 300 index slumps 4.4 pct

* Banks, energy stocks fall on recession fears

* Volkswagen zooms as Porsche raises stake

By Joanne Frearson

LONDON, Oct 27 (Reuters) - European shares slumped early on Monday, tracking big losses in Asia as intensified fears of a global recession hit banks and energy shares, while Volkswagen (VOWG.DE: Quote, Profile, Research, Stock Buzz) soared as Porsche (PSHG_p.DE: Quote, Profile, Research, Stock Buzz) raised its stake.

By 0935 GMT the FTSEurofirst 300 index of top European shares was down 4.4 percent at 793.52 points, adding to Friday's decline of 4.9 percent.

Asian shares extended losses on Monday, with Japan's Nikkei sliding 6.4 percent to its lowest close in 26 years, as central bank policy moves including a record rate cut in South Korea were not enough to allay fears of a global recession. [ID:nHKG66296]

Banks took the most points off the European index. HSBC (HSBA.L: Quote, Profile, Research, Stock Buzz), BNP Paribas (BNPP.PA: Quote, Profile, Research, Stock Buzz), Societe Generale (SOGN.PA: Quote, Profile, Research, Stock Buzz) and Banco Santander (SAN.MC: Quote, Profile, Research, Stock Buzz) were down between 5.3-12.7 percent.

"We are wallowing around in the sea of unknown. Until the capital market situation is eased and the money comes out of governments into the banking system we are not going to see anything different. Recession remains on everyone's lips and is the top concern," said Howard Wheeldon, strategist at BGC Partners.

Energy shares were also lower. Crude CLC.1 fell by 3.5 percent as an emergency production cut by OPEC was shrugged off by traders anxious about the onset of a deep global recession.

"The falls in the commodity price despite the cuts reflect how weak OPEC is in these circumstances. It shows how low global demand has become. Investors are not convinced there is going to be any pick up anytime soon," said Justin Urquhart Stewart, investment director at Seven Investment Management.

BG Group (BG.L: Quote, Profile, Research, Stock Buzz), BP (BP.L: Quote, Profile, Research, Stock Buzz), Royal Dutch Shell (RDSb.L: Quote, Profile, Research, Stock Buzz) and Total (TOTF.PA: Quote, Profile, Research, Stock Buzz) were down between 4.9-8.4 percent.

Pharmaceutical stocks were also in the doldrums as European drugmaker Merck (MRCG.DE: Quote, Profile, Research, Stock Buzz) trimmed its full-year operating margin target.

Roche (ROG.VX: Quote, Profile, Research, Stock Buzz), Sanofi-Aventis (SASY.PA: Quote, Profile, Research, Stock Buzz) and AstraZeneca (AZN.L: Quote, Profile, Research, Stock Buzz) were down between 1.5-4.9 percent.

VOLKSWAGEN JUMPS ON PORSCHE STAKE RAISE

Volkswagen (VOWG.DE: Quote, Profile, Research, Stock Buzz) jumped 87 percent after weekend news that sports carmaker Porsche (PSHG_p.DE: Quote, Profile, Research, Stock Buzz) has raised its VW stake to 42.6 percent of votes and controls a further 31.5 percent via cash-settled options.

British bank HBOS (HBOS.L: Quote, Profile, Research, Stock Buzz) also bucked the downtrend, up 2.5 percent. British Prime Minister Gordon Brown said in the Financial Times over the weekend that the proposed merger between LloydsTSB (LLOY.L: Quote, Profile, Research, Stock Buzz) and the group was the right step to save the bank as no other bidders had come forward.

Underlining worries on the macroeconomic front, the German Ifo index which measures indications about German business sentiment fell to its lowest level since May 2003 on expectations the export sector will take a big hit from weakened foreign demand. [ID:nLR590297]

"All economic data which we have had over recent weeks and will get in the months ahead is going to be on the negative side and therefore there is nothing to hang any confidence on," said Wheeldon.

At 1400 GMT U.S. new home sales data will give the latest snapshot of the state of the U.S. housing market.

Across Europe, the FTSE 100 .FTSE index was down 4.35 percent, Germany's DAX .GDAXI slipped 2.6 percent and France's CAC 40 .FCHI index was 5.5 percent lower. (Editing by Greg Mahlich)