Europe's equities sank Friday on disappointment over the reported size of potential bond purchases from the European Central Bank, while Madrid was rocked by giant bank Santander's vast capital hike.
In afternoon trading London's FTSE 100 shed 0.52 percent to 6,535.94 points, Frankfurt's DAX 30 lost 0.41 percent to 9,797.36 points and the CAC 40 in Paris dropped 0.92 percent to 4,220.92.
Madrid's IBEX 35 slumped 2.64 percent to 9,848.0 points, with shares in Spanish banking titan Santander collapsing on shock news of a 7.5-billion-euro ($8.8-billion) capital raising.
The second heaviest losses were witnessed in Milan, where the FTSE MIB index dived 1.06 percent to 18,593.24 points.
The single currency languished close to a nine-year low, at $1.1774 in London, after tumbling Thursday to $1.1754 -- last seen in December 2005 -- on ECB stimulus speculation.
ECB staff have presented its governing council with various models for a new asset purchase programme to ward off deflation in the euro area, Bloomberg news agency reported.
Staff presented a number of possible scenarios to purchase up to 500 billion euros in investment-grade assets to the ECB's policy-setting governing council at a meeting this week.
However, governors took no decision on the design or implementation of any package after the presentation, Bloomberg said, quoting sources who attended the meeting.
"That ECB story has helped" push markets lower, said analyst Michael Hewson at trading firm CMC Markets.
"500 billion euros is below market expectations of what is required -- and we are getting a bit of a selloff on that."
ECB chief Mario Draghi said recently that the governing council asked its staff to draw up possible scenarios for the launch of a policy of so-called quantitative easing (QE) -- or the large-scale purchase of sovereign bonds -- to prevent the eurozone from sliding into a deflationary spiral of falling prices.
- Santander stock tumbles -
Back in Madrid, investors were still shell-shocked by the surprise news from Santander, which is the eurozone's largest bank by market value.
Banco Santander's share price nosedived 11.1 percent to 6.09 euros on Friday when it resumed trading after it unveiled plans the day before to raise the fresh funds.
The unexpected move by new Santander chairwoman Ana Botin was aimed at dispelling concerns among investors that its financial cushion is thinner than those of other big European banks.
The shares sale will amount to about 10 percent of the current market value of the lender.
"It’s Banco Santander that’s hammering the IBEX," TrustNet analyst Tony Cross told AFP
"The heavyweight stock accounts for around one fifth of the index and the announcement of a new share issue yesterday is taking a toll."
Wall Street stocks opened lower Friday after a government report showed strong US jobs growth in December, but weak wage levels.
The Dow Jones Industrial Average shed 0.20 percent in the first five minutes of trading to 17,872.48, while the broad-based S&P 500 dipped 0.11 percent to 2,059.81 and the tech-rich Nasdaq Composite Index slipped 0.03 percent to 4,734.59.
While the US economy added a solid 252,000 jobs in December and the unemployment rate dropped to 5.6 percent, hourly wages fell and the labor participation rate dropped.
That mixed data is unlikely to shake the US Federal Reserve from its current course of raising interest rates later this year although 2014 turned out to be the best year for job generation in the United States in 15 years.
Asian shares mostly climbed for a third straight day Friday following more advances on Wall Street overnight.
- Volatile trading week -
Markets were hit hard earlier this week as global oil prices plunged under $50 per barrel for the first time in more than five years on plentiful crude supplies, demand fears and the strong dollar.
Confidence had picked up in recent days as analysts predicted the ECB will launch QE to kickstart the eurozone economy.
Expectations were fanned when data Wednesday showed consumer prices in the region had fallen for the first time since October 2009, during the financial crisis.
"The first week of the New Year is nearly over and for very many it is not going to be a week that they quickly forget," said Alpari analyst James Hughes
"With oil prices dropping below $50 a barrel, deflation finally in the eurozone and some huge swings in equity and currency markets you could have been forgiven for thinking there had been no festive break at all."