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European shares snapped a two-day winning streak on Friday, ahead of key US non-farm payrolls data, with Spain’s Banco Santander sliding over 10 per cent after unveiling a capital hike and dividend cut.
The euro zone’s biggest bank by market value announced the quick-fire share sale late on Thursday and sold 1.2 billion shares at €6.18 apiece, at the bottom of the indicated price range and a 10 per cent discount to its last closing share price.
The selling pressure dragged Spain’s benchmark IBEX index down 2 per cent, heavily underperforming the pan-European FTSEurofirst 300 index which was down 0.2 per cent at 0856 GMT.
Santander said the sale would fund its expansion, which had prompted speculation it could look at acquisitions such as Italy’s Monte dei Paschi. Shares of the Italian bank were down 4.2 per cent, however, as hopes for a deal began to fade.
Traders pointed to the discounted price as a negative for the stock, though some analysts said the move would pay off.
“This was a needed capital rebuild that addresses a known issue,’’ Goldman Sachs analysts wrote in a note to clients.
UK retailer Tesco was also down by almost 3 per cent after Moody’s cut the company’s credit rating to “junk’’.
Investors were otherwise focused on US data expected later in the day, with the market mood more subdued following strong gains in Thursday’s trading session driven by hopes that central banks would stick to their accommodative post-crisis stance.
Figures out of Germany Friday morning showed industrial output from Europe’s No. 1 economy in November fell 0.1 per cent month-on-month, compared with a Reuters consensus forecast gain of 0.4 per cent. Exports also fell sharply.
A strong US non-farm reading would strengthen the prospects of the US Federal Reserve hiking rates later this year and again highlight the contrast in policies between the ECB, now facing euro zone deflation and seen on the brink of adopting quantitative easing.
“An extremely positive number could cause some ripples particularly given the timing of a Fed rate hike, as it would suggest that any slack in the US labour market could disappear faster than anticipated,’’ said Michael Hewson, CMC Markets analyst.
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