File photo of traders in London, Britain
by Diana Mandia
(Reuters) – European stocks ended cautiously higher on Friday as the market digested a U.S. jobs report showing a slowing but still tight labor market despite rising interest rates.
In Paris, the CAC 40 ended up 0.75% at 7,315.07 points. The British Footsie gained 0.47% and the German Dax 0.37%.
The EuroStoxx 50 index gained 0.66%, the FTSEurofirst 300 0.21% and the Stoxx 600 0.29%.
However, the CAC 40 lost 2.16% and the Stoxx 600 2.44% over the week, which was difficult with the contraction in manufacturing activity in July at its fastest pace since the COVID-19 pandemic.
The markets took note on Friday of the long-awaited report on American employment. The United States created fewer jobs than expected last month – 187,000 against an average estimate of 200,000 by analysts – while higher-than-estimated wage growth and a drop in the unemployment rate point to a a resilient economy and a tight labor market.
“The market has weakened, but earnings have been a little warmer, which kind of offsets that,” said Alex Coffey, senior trading strategist at TD Ameritrade.
Joost van Leenders, senior investment strategist at Van Lanschot Kempen, however, said that “nothing changes for the euro zone, because the inflation cycle is a bit later in Europe”.
Markets are still betting on a 25 basis point European Central Bank rate hike by the end of the year, he added.
Traders expect the deposit rate to peak at 3.90% by December, up from 3.75% currently, meaning the ECB could still tighten the screw.
In the euro zone, core inflation is showing signs of moderation, however, and has probably peaked, according to an article published by the Frankfurt institution.
DAILY INDICATORS
The unexpected jump in German factory orders in June, up 7% amid consensus expectations for a 2% decline, helped support market sentiment, however analysts expressed doubts about the sustainability recovery because most of the growth came from the aerospace sector.
“In this regard, the current rise is hardly sustainable,” said Joerg Kraemer, chief economist at Commerzbank.
In the euro zone, retail sales fell by 1.4% in June, a less marked decline than expected.
VALUES
In Paris, Crédit Agricole jumped 6.14%, the biggest rise in the CAC 40, after better than expected quarterly results and the announcement of a plan to buy Belgian wealth manager Degroof Petercam.
Publicis ended on a fall of 0.27%, weighed down by the warning on the prospects of the advertising group WPP (-3.45%).
Elsewhere in Europe, AP Moller-Maersk, which has warned of a steeper decline this year in global container shipping demand, dropped 4.8%.
AT WALL STREET
At the time of the close in Europe, the New York Stock Exchange was trading higher, supported by the cooling of the American labor market and signs of economic resilience, the Dow Jones gaining 0.54%, the Standard & Poor’s 500 0.50% and the Nasdaq Composite 0.65%.
Amazon climbed 10% after its upbeat third-quarter outlook, while Apple fell 3% as the iPhone maker forecast another quarterly drop in sales.
CHANGES
Hopes that the US central bank will put the brakes on rates in light of the jobs report weighs on the greenback.
It is down 0.73% against a basket of benchmark currencies, erasing almost all of its gains for the week, while the euro is up 0.83% at 1.1035 dollars.
The pound sterling advances from 0.46 to 1.2772 dollars, after raising the key rate of the Bank of England on Thursday.
RATE
Yields in Europe fell slightly, in line with their US equivalents after the release of jobs data.
The ten-year German yield, the benchmark in the eurozone, fell about two basis points to 2.535%.
The yield of ten-year Treasuries dropped more than ten basis points to 4.0843% and that of two years more than seven to 4.8226%.
OIL
Oil is on course for its sixth week of gains after Saudi Arabia and Russia, the world’s second- and third-largest crude producers respectively, pledged to cut output in September.
Brent rose 1.13% to 86.1 dollars a barrel and US light crude (West Texas Intermediate, WTI) rose 1.23% to 82.55 dollars.
TO BE FOLLOWED ON MONDAY:
(Written by Diana Mandia)