European shares extended losses and German Bund futures hit session highs on Tuesday, with traders citing a media report that German policymakers had reiterated their opposition to giving the European Stability Mechanism a full banking licence.

The Bund future rose as high as 144.43, up 110 ticks on the day. The FTSEurofirst 300 index was down 0.8 percent at 1,064.60 points.

"It's the finance minister saying there is no need to give the ESM a banking licence. Yes, it's his view all the time but that's what's triggered the sell-off (in equities) and the banks are getting hit," said Martin Tormey, head of equity trading at Goodbody Stockbrokers.