* STOXX up 0.2 pct, posts weekly gain
* Euro zone bank index hits 15-month high, then eases
* Tullow Oil plunges on rights issue news
(Recasts, adds detail and updates prices at close)
By Danilo Masoni and Kit Rees
LONDON, March 17 European shares edged higher on
Friday, though weaker auto stocks euro zone banks weighed.
The latter had hit a fresh 15-month high but fell back after
a European Central Bank policymaker rekindled talk of a possible
Ewald Nowotny said the ECB would decide at a later date
whether to raise interest rates before or after ending its bond
purchasing programme, pushing euro zone government bond yields
He said the ECB could hike its below-zero remuneration of
bank deposits before the main rates at which it lends to banks.
Traders said his comments sparked an early rally in bank
stocks but the sector turned lower later. The STOXX 600
nevertheless ended up 0.2 percent with a 1.4 percent gain for
Money markets showed at one point an 80 percent chance the
ECB would lift its deposit rate in December, up from 60 percent
a week ago.
Rabobank analysts said Nowotny's comments had been
over-interpreted, even though they could not rule out the
possibility of the ECB tightening policy before ending its
The euro zone bank index rose as much as 1.4 percent
before paring gains and ended the session down 0.1 percent,
weighed by losses in Erste Group Bank, ABN AMRO Group
and Deutsche Bank, which all fell between
1.5 percent to 1.9 percent.
Europe's broader bank index reversed course to fall
0.6 percent, weighed down by Nordea Bank going ex
dividend and trading 6.3 percent lower. In spite of the
volatility, some investors were upbeat about prospects for the
sector, whose margins have been squeezed by ultra-easy central
"I think Nowotny and a lot of the regulators and central
bankers realise that negative interest rates have been a
disaster for the economy and they're going to get more
positive," said David Hussey, head of European equities at
Manulife Asset Management in London.
"There is a good short-term trade in banks and there is a
medium- to long-term buy case for European financials generally
as regulation and the economy improves," he added.
Autos also fell, dropping 0.5 percent.
Top fallers in the auto sector included German carmakers
Porsche, Volkswagen and BMW,
down between 0.9 percent and 1.9 percent.
Elsewhere, Tullow Oil plunged 14.7 percent, the
biggest faller on the STOXX 600 index, after the British oil
services company announced a 607 million pound share sale to
reduce its debt.
But London-focused housebuilder Berkeley Group rose
6.1 percent to its highest level since Britain voted to leave
the European Union, as investors cheered full-year forecasts at
the top end of market estimates.
German airport operator Fraport rose 4.8 percent,
also boosted by well-received 2017 guidance.
(Reporting by Danilo Masoni and Kit Rees)