* FTSEurofirst 300 down 1.4 percent
* Banking stocks down; Volkswagen gains
* Commodity stocks lower as metal, crude prices retreat
By Joanne Frearson
LONDON, June 8 (Reuters) - European shares were lower towards midday on Monday, led by banking stocks as investor sentiment weighed, while commodity stocks fell as metal and crude prices retreated. By 1026 GMT, the pan-European FTSEurofirst 300 index was down 1.4 percent at 860.20 points. The index has risen for the past three out of four weeks and has gained around 33 percent since hitting a lifetime low in early March.
"The market has had a tremendous run so it is not surprising money is being taken off the table. We do not think this is serious, but a correction which is long overdue," said David Buik, partner at BGC Partners.
"Yields on U.S. government bonds are also sharply higher which may mean we could be looking at interest rates rises ... so investors could also be cautious over that," he said.
Yields on benchmark 10-year U.S. Treasury ticked up slightly on Monday, but have risen by about 23 percent since the beginning of May.
The banking sector took the most points off the pan-European index. British bank Barclays fell 2.2 percent. The bank said it is in talks to sell Barclays Global Investors (BGI), with U.S. fund manager BlackRock the frontrunner to land the asset manager, according to people familiar with the matter.
Lloyds Banking Group lost 5.6 percent after it said it had raised just under 3.5 billion pounds ($5.56 billion) from shareholders which it will use to pay back some of the money injected by the British government last year.
UBS slipped 1.8 percent after Swiss newspapers quoted UBS board member Bruno Gehrig as saying the bank was "not out of the woods yet" as it was still seeing outflows of client money. UBS declined to comment.
However, Deutsche Postbank rose 7.4 percent on a report in German business daily Handelsblatt that said Deutsche Bank has raised its Postbank stake through purchases in the market. Deutsche Bank was down 1.9 percent.
COMMODITIES WEIGH AS PRICES RETREAT
Energy stocks were another drag on the index as oil fell below $67 a barrel after hitting a seven-month high of $70 last week as the dollar strengthened.
BG Group, BP, Royal Dutch Shell and Total lost 0.5-2.3 percent.
Miners were in the doldrums as metal prices fell with copper down 1 percent.
Anglo American, Antofagasta, BHP Billiton, Eurasian Natural Resources Corporation, Rio Tinto and Xstrata lost between 3.9-5 percent.
"The market is trying to get some visibility on the 2010 economic outlook. At the moment there is relatively little visibility on that. We are going to see strong contributions to growth through (the rebuilding of) inventories in the next two months," said Darren Winder, equity strategist at Cazenove.
"Beyond that investors are looking to get some indications about what's happening to the underlying level of demand. At the moment there is very little information about that."
German manufacturing orders held steady in April after a sharp increase in March, raising the mid-term prospects for the country's industrial sector, the Economy Ministry said.
On the upside, Volkswagen was up 4.3 percent after a German magazine reported the gulf state of Qatar will strike a deal with the company that will help Porsche, VW's biggest shareholder, cope with its 9 billion euro ($12.45 billion) debt pile.
Porsche was 0.2 percent higher.
Novartis gained 0.9 percent after the Swiss drugmaker said its Afinitor medicine cut tumour size by 50 percent or more in a third of patients with lymphoma, in a mid-stage clinical trial.
Across Europe, the FTSE 100 index was down 1.4 percent, Germany's DAX was down 1.6 percent and France's CAC 40 was 1.6 percent lower. (Editing by Rupert Winchester)