By Tommy Stubbington
European shares fell on Friday, weighed by declines in banking
stocks, as the previous session's hefty rally faded.
Bank shares were a notable weak spot, hit by a more than 10%
fall in shares of Spanish lender Banco Santander after it launched
a EUR7.5 billion ($8.88 billion) capital hike. That also hurt the
broader Madrid stock market which was 3.1% lower.
Analysts at Berenberg said Santander's decision to raise cash
undermines the credibility of the European Central Bank's health
check, which the Santander comfortably passed two months ago.
"We see increased pressure on other banks to raise capital,"
Berenberg said.
Stocks around the world had surged on Thursday as investors bet
that central banks will continue to flood financial markets with
cheap money. Signs that the U.S. Federal Reserve is in no hurry to
raise interest rates and a growing consensus that the European
Central Bank will soon launch a bond-buying stimulus program had
bolstered markets.
But the gains fizzled out in Europe on Friday, staying lower
after data showing the U.S. economy created more jobs than expected
in December.
The Stoxx Europe 600 was 0.6% lower midafternoon, having climbed
2.8% on Thursday.
Germany's DAX fell 1.0%, while France's CAC 40 and the U.K.'s
FTSE 100 were 0.7% lower.
U.S. stocks were also lower in early trade.
Investors are weighing what form an ECB bond-buying program
might take. ECB staff economists this week presented the bank's
governing council with the implications of a potential EUR500
billion government bond purchase program on inflation, a person
familiar with the matter said Friday, in the latest sign the ECB is
preparing to ramp up its efforts.
"The market is likely expecting a larger program," said currency
strategists at Scotiabank.
In currency markets, the upbeat U.S. labor data helped push the
euro to a fresh nine-year low against the dollar.
The single currency fell slightly to $1.1763, its weakest level
since 2006.
Brian Blackstone contributed to this article.
Write to Tommy Stubbington at tommy.stubbington@wsj.com
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