European shares fall as US rate cut expectations wane

(Reuters) -European shares fell on Friday, as hawkish commentary from U.S. policymakers dampened expectations for an imminent interest rate cut, although the benchmark index was set for its strongest weekly performance since late September.

The pan-European STOXX 600 dropped 0.9% to 575.41 points as of 0810 GMT, with banks down nearly 2%. The benchmark index was up 1.86% for the week.

Macro developments in the U.S. has been in the spotlight this week and investors were hopeful that the resumption of data releases would point to a weaker economy and give the Federal Reserve reason to lower borrowing costs in December.

However, investors pared those expectations after a growing number of Fed policymakers signalled caution on further easing.

In bright spots, luxury group Richemont gained 7.8% after reporting quarterly sales well ahead of forecasts.

Siemens Energy jumped 10% after the German company announced plans to pay its first dividend in four years and raised its mid-term outlook following strong demand for gas turbines, services and power transmission technology.

Meanwhile, UK stocks underperformed the broader continent, pressured by a spike in gilt yields after a report said Finance Minister Rachel Reeves scrapped plans to raise income tax rates in the budget due later this month, raising questions on how the government plans on balancing public finances.

(Reporting by Johann M Cherian in Bengaluru; Editing by Eileen Soreng)