Shares extended their losses after Moody’s said a recent rise in interest rates on French government debt and weaker economic growth prospects could be negative for the country’s credit rating.

At 0951 GMT, the FTSEurofirst 300 index of top European shares was down 2 percent at 931.96 points, losing ground for the fifth time in six sessions.

The euro zone’s blue chip Euro STOXX 50 index was down 2.3 percent at 2,184.32 points, breaking below a key support level, the 50 percent Fibonacci retracement of the market’s recovery rally started in late September.

“The negative newsflow is prompting investors to get out of the market,” Aurel BGC technical analyst Alexandre Le Drogoff said. “Things could develop quickly on the downside for the Euro STOXX 50, and at this point, we’re targeting the lows of 2009.”

Euro zone banks featured among the biggest losers, with Commerzbank down 5 percent and Societe Generale down 4.4 percent.

Adding to euro zone debt worries, congressional sources said over the weekend Republicans and Democrats on a deficit-reduction panel are expected to announce on Monday they have been unable to reach a deal after months of effort.

MUNI BONDS

“Europe is not the only one with debt problems, and at least on this side of the Atlantic, progress has been made while in the United States, there’s a political gridlock,” said David Thebault, head of quantitative sales trading, at Global Equities.

“The fear is that if growth slows down in the United States, the muni bond market could become catastrophic.”

US stock index futures dropped, with futures for the S&P 500 down 1.7 percent, on the Dow Jones down 1.4 percent and on the Nasdaq 100 down 1.1 percent.

Around Europe, the UK’s FTSE 100 index was down 2 percent, Germany’s DAX index lost 2.6 percent and France’s CAC 40 dropped 2.7 percent.

After tumbling to a 26-month low in late September, the FTSEurofirst 300 bounced back as much as 30 percent, but nagging concerns over the finances of Italy and Greece as well as and fears of contagion to France and Spain have halted the recovery.

According to data from EPFR Global, investors took a more defensive posture in the five trading sessions to Nov. 16, pulling out more money from European bond and equities. Developed Europe equity funds had net outflows of $603 million, while the corresponding bond funds had net outflows of $757 million.