LONDON Dec 21 Weaker bank stocks led European shares lower on Friday, with equity markets hit by new signs the United States may fail to reach a deal to avoid growth-sapping fiscal measures.
Equities fell after the U.S. Republican party failed overnight to back a plan aimed at averting a "fiscal cliff" of looming tax hikes and government spending cuts that could hit the U.S. economy next year.
The pan-European FTSEurofirst 300 index provisionally closed down 0.3 percent at 1,138.90 points, although it was still close to a 19-month high of 1,144.15 points reached earlier this week.
The STOXX 600 European banking index was among the worst-performing sectors, declining by 1 percent with UK bank shares falling after a parliamentary report warned the sector may need tougher regulation.
"The market just stopped in its tracks after that unexpected announcement last night," said Berkeley Futures associate director Richard Griffiths.
"But it's showing resilience. It's not down by that much and people think it's just a delay before they reach a deal in maybe three weeks time," he added.