European stocks were down 2 percent in late trade on Monday, with French banking shares hit by mounting fears over their exposure to debt-stricken countries, but the lack of a sell-off at the open on Wall Street helped the market trim losses.

At 1440 GMT, the FTSEurofirst 300 index of top European shares was down 2 percent at 897.12 points after falling as much as 3.7 percent and hitting a two-year low earlier in the session.

On Wall Street, the Dow Jones industrial average was down 0.6 percent, the Standard & Poor's 500 Index shed 0.4 percent while the Nasdaq Composite Index gained 0.1 percent.

It's a real flight to liquidity that is happening at the moment. Fund managers are going for cash as much as they can, said David Thebault, head of quantitative sales trading at French broker Global Equities.

Although it's too early to call it a floor, there are interesting picks in some sectors such as services and luxury, where you can buy at prices that are below book value.

France's BNP Paribas was down 11.6 percent, as investors fretted over the bank's exposure to Italy after the country's t-bill auction at which yields hit a three-year high above 4 percent, up from 2.96 percent at an auction a month ago.

French bank stocks were also hurt by mounting expectation of a credit rating downgrade from the Moody's agency.

Several sources said on Saturday that BNP Paribas, Societe Generale and Credit Agricole were expecting an imminent decision from the agency, which first put them under review for possible downgrade on June 15.