European stocks extended their losses on Friday, losing more than 2 percent as a deepening concern surrounding the U.S. subprime mortgage market continued to hit stocks worldwide and pushed U.S. futures in the red.

At 0955 GMT, the pan-European FTSEurofirst 300 index was down 2.14 percent, at 1,493.39, coming on top of its 1.8 percent drop on Thursday.

At this point, the fear is to see the dreaded systemic effect happening, said Philippe Waechter, head of economic research at Natixis AM in Paris.

The markets are entering a period of explosive volatility and it will take time for investors to regain confidence, Waechter said.

Shares of financial institutions sank, with Royal Bank of Scotland down 3.9 percent, Barclays down 5.1 percent, ABN AMRO dropping 5 percent, and Credit Suisse falling 4.1 percent.

ABN was also hit by market talk that Fortis, part of a bidding consortium for ABN, may find it hard to finance its part of the deal.

U.S. stock futures pointed to a negative open on Wall Street.