* FTSEurofirst 300 down 0.3 pct
* Santander slides after cap hike announcement, dividend cut
* U.S. non-farm payrolls data eyed
* German exports fall sharply, industrial output declines
* Euro trading near fresh nine-yr lows versus dollar
By Lionel Laurent
LONDON, Jan 9 (Reuters) - European shares snapped a two-day winning streak on Friday, ahead of key U.S. non-farm payrolls data, with Spain's Banco Santander sliding over 10 percent after unveiling a capital hike and dividend cut.
The euro zone's biggest bank by market value announced the quick-fire share sale late on Thursday and sold 1.2 billion shares at 6.18 euros apiece, at the bottom of the indicated price range and a 10-percent discount to its last closing share price.
The selling pressure dragged Spain's benchmark IBEX index down 2 percent, heavily underperforming the pan-European FTSEurofirst 300 index which was down 0.2 percent at 0856 GMT.
Santander said the sale would fund its expansion, which had prompted speculation it could look at acquisitions such as Italy's Monte dei Paschi. Shares of the Italian bank were down 4.2 percent, however, as hopes for a deal began to fade.
Traders pointed to the discounted price as a negative for the stock, though some analysts said the move would pay off.
"This was a needed capital rebuild that addresses a known issue," Goldman Sachs analysts wrote in a note to clients.
UK retailer Tesco was also down by almost 3 percent after Moody's cut the company's credit rating to "junk".
Investors were otherwise focused on U.S. data expected later in the day, with the market mood more subdued following strong gains in Thursday's trading session driven by hopes that central banks would stick to their accommodative post-crisis stance.
Figures out of Germany Friday morning showed industrial output from Europe's No. 1 economy in November fell 0.1 percent month-on-month, compared with a Reuters consensus forecast gain of 0.4 percent. Exports also fell sharply.
A strong U.S. non-farm reading would strengthen prospects of the U.S. Federal Reserve hiking rates later this year and again highlight the contrast in policies between the ECB, now facing euro zone deflation and seen on the brink of adopting quantitative easing.
"An extremely positive number could cause some ripples particularly given the timing of a Fed rate hike, as it would suggest that any slack in the US labour market could disappear faster than anticipated," said Michael Hewson, CMC Markets analyst.
Europe bourses in 2014: link.reuters.com/pap87v
Asset performance in 2014: link.reuters.com/gap87v
Today's European research round-up (Editing by Toby Chopra)