European shares fell on Friday, signalling a five-week rally was likely coming to an end as hopes waned that a summit deal to tackle the euro zone crisis would come into effect soon or central banks offer more stimulus measures.
Spanish banks led a selloff among euro zone lenders, down 1.5 percent, on growing concerns that Madrid may need additional aid after the European Central Bank failed to signal new measures to support struggling countries and banks on Thursday.
ECB chairman Mario Draghi dismissed the prospect of buying more distressed sovereign bonds, or lending directly to the euro zone's bailout funds to help support banks and buy debt in the secondary market.
``The ECB mandate is not changing yet. It will probably cut interest rates again but its future role with regard to ESM (rescue fund) financing is still unclear,'' Emmanuel Cau, strategist at JPMorgan, said.
``Even if Europe is moving in the right direction, resolution of the sovereign crisis is going to be a slow process. EU summit announcements were a positive but implementation risks are high and we have few details at this stage.''
Spanish bank BBVA fell 5 percent, also weighed down by dilution associated with the conversion of a bond into shares, while peer Banco Santander was down 2.2 percent. They weighed on the pan-European FTSEurofirst 300 index , which was down 0.2 percent at 1,042.52 points by 1032 after shedding 0.1 percent in the previous session, although the index was still up 2.1 percent for the week.
The euro zone Euro STOXX 50 index was 0.5 percent lower at 2,273.99 points, extending a technical pullback after failing to close above resistance at its 200-day moving average on Thursday.
``Now that resistances are reached, what we should see is sharp corrections and new bounces,'' Valerie Gastaldy, head of Paris-based technical analysis firm Day-By-Day said in a note, adding she expected pan-European indexes to trade in a 4 percent range until the middle of next week.
``As the mid-term trend remains bearish, we expect the breach of the support (and not the resistance) and a return down to the June lows area.''
A third straight session of losses cut the Euro STOXX 50's gains for the week to a mere 0.4 percent, jeopardising its longest weekly winning streak since 2009.
The surge has came as tensions surrounding the euro zone debt crisis eased following a European agreement to bail out Spanish banks, the establishment of a pro-bailout government in Greece and new EU-wide initiatives to help euro zone lenders.
Also boosting the market in June were expectations that the Federal Reserve would launch a new quantitative easing programme to shore up the U.S. economy in the face of worsening economic activity data.
But these hopes began fading on Thursday when a better-than-expected private employment report raised prospects that non-farm payrolls data due at 1230 GMT may deliver a consensus beat.
``The market has been supported recently by expectations of QE3 in the U.S. and this is very concerning to us because, clearly, the market has yet to price in the weak activity,'' JPMorgan's Cau said.
``As of now, manufacturing activity is weakening, but the labour market seems to hold up. We think that we need to see more weakness in the activity for the Fed to do QE3.''
He added a likely mixed U.S. reporting season, due to start next week, could be ``a reality check'' for U.S. shares, which were still trading just 3.9 percent off three-year highs.
In a risk-off trading day in Europe, defensive shares led gainers, with utilities, food and beverage and healthcare shares up between 0.3 percent and 0.4 percent.