European shares fell on Friday, snapping a four-day winning streak, after the U.S. Federal Reserve raised an emergency lending rate, with banks among the worst performers.
By 0940 GMT, the pan-European FTSEurofirst 300 index of top shares was down 0.4 percent at 1,017.47 points after being down as low as 1,010.83.
The index which gained around 26 percent last year is down nearly 3 percent for the year.
"It (the Fed announcement) took the markets by surprise," said Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets in Brussels "The market is now struggling between the negative and the positive view."
"Some are worried that it is a signal for the Fed to become more hawkish … but others are more positive and see it means the market is now normalising and the economy is recovering enough to be on its own."
Banks featured among the worst performers but some stocks were recovering from earlier falls. Banco Santander, UBS and Lloyds Banking Group fell 0.9 to 1.1 percent.
However, HSBC, BNP Paribas and Barclays rose 0.5 to 0.9 percent.
The Fed cast its decision to raise the discount rate to 0.75 percent from 0.5 percent as a response to improved financial market conditions that warrant less of a helping hand from the U.S. central bank.
Across Europe, the FTSE 100 index was down 0.1 percent and both Germany's DAX and France's CAC 40 lost 0.2 percent.
ANGLO AMERICAN WEIGHS
Miners declined after metal prices fell. Anglo American slipped 1.7 percent after it didn't reinstate a dividend following annual results.
BHP Billiton, Eurasian Natural Resources Corporation, Rio Tinto and Xstrata were down 0.4 to 0.6 percent.
Construction stocks were out of favour. The world's biggest cement maker Lafarge fell 2.8 percent after its 2009 current operating income dropped 30 percent as the economic crisis hit construction activities.
French defence electronics company Thales slumped 10 percent after it forecast lower new orders in 2010 and said it plunged into the red last year due to writedowns for money-losing deals.
On the upside, Nestle gained 2.4 percent after it said it is aiming for higher underlying sales growth in 2010 after a robust performance in Asia and the Americas helped it beat forecasts for 2009.
U.S. January CPI figures are due out at 1330 GMT. Economists in a Reuters survey expected a 0.3 percent increase compared with a 0.2 percent rise the prior month.
