European stocks sank early Tuesday after Greek prime minister called a referendum on the latest bailout deal, risking a new euro zone crisis, while data showed China's factory activity slowed to a near three-year low.

At 0805 GMT (4:05 a.m. EDT), the FTSEurofirst 300 <.FTEU3> index of top European shares was down 2.2 percent at 973.85 points, after tumbling 2.2 percent in the previous session.

Euro zone banks were hammered, with UniCredit (CRDI.MI) down 4.8 percent and Credit Agricole (CAGR.PA) down 8 percent.

The risk is that a 'no' from the Greeks will completely derail the rescue efforts. With the vote due in January, we can kiss the year-end rally goodbye, a Paris-based trader said.

Miners also took a beating, with Xstrata (XTA.L) down 4.7 percent and BHP Billiton (BLT.L) down 3.1 percent.

(Reporting by Blaise Robinson)