(Corrects time in second paragraph)
* FTSEurofirst 300 down 0.3 percent after hitting 4-week low
* Financials, drugmakers among top decliners
* Royal Bank of Scotland falls 7.2 percent
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By Atul Prakash
LONDON, Nov 2 (Reuters) - European shares hit a four-week low on Monday, extending the previous session's sharp declines on doubts that the stock market had rallied ahead of economic recovery, with banks featuring among top losers.
By 0929 GMT, the FTSEurofirst 300 index of top European shares was down 0.3 percent at 973.90 points after falling to 968.19 -- the lowest since early October. It fell 2.1 percent on Friday, the biggest one-day slide in nearly four months, hit by weak U.S. consumer sentiment data.
The index, which is up 17 percent so far in 2009, has gained 51 percent since hitting a record low in early March.
Banks were among the top losers, also pressured by news that CIT Group Inc, a U.S. lender to hundreds of thousands of small and medium-sized businesses, filed for bankruptcy on Sunday, as the global financial crisis left it unable to fund itself and the recession hit its loans.
Standard Chartered, Barclays, Societe Generale, Credit Agricole and UBS fell 0.2 to 0.7 percent.
"Everybody is anxious and knows that the market went a little bit too fast," said Koen De Leus, economist at KBC Securities.
"To change that sentiment, we have to see much better macroeconomic figures because now company earnings won't be able to support the stock market anymore as results of the biggest companies are over," he added.
Lloyds was down 2.7 percent. The Financial Times reported that the bank will attempt to raise 7.5 billion pounds ($12.3 billion) capital by offering existing bond holders the chance to exchange their bonds for riskier but higher yielding investments that could convert into equity.
Part-nationalised Royal Bank of Scotland fell 7.2 percent after the lender said EU authorities would order more disposals than it had expected in return for approval of state aid RBS received after coming close to collapse last year.
The VDAX-NEW volatility index, a measure of investor risk appetite or aversion, hit a two-month high and was up 1.9 percent, adding to Friday's 14 percent jump. The higher the index, which is based on sell and buy options on Frankfurt's top-30 stocks, the lower is investors' appetite for risky assets.
DRUGMAKERS UNDER PRESSURE
Pharmaceutical shares were among top decliners, with Novartis falling 0.9 percent on news that French drugmaker Sanofi-Aventis SA asked a U.S. federal court to block a Novartis unit from selling a generic version of its cancer drug in the United States because it infringes a patent.
Sanofi-Aventis rose 0.5 percent. It wants to double its vaccine business in the next five years, its chief executive told a German newspaper on Saturday.
Shire fell 0.9 percent after Panmure cut its rating on the stock to "hold" from "buy", while AstraZeneca, GlaxoSmithKline, Merck, Novo Nordisk and Roche Holding dropped 0.1 to 1.4 percent.
Linde, the world's number 2 industrial gas producer, rose 1.5 percent after posting a smaller-than-expected fall in third-quarter operating profit and said demand had started to recover slowly.
Investors braced for more U.S. macro data later on Monday on construction spending, pending home sales as well as data from the Institute of Supply Management.
In macro-economic news, China's manufacturing sector expanded at the fastest pace in 18 months in October as demand both overseas and at home grew quickly, an industry survey conducted by British research firm Markit showed on Monday, pointing to sustained strength for the sector. (Editing by Hans Peters)