LONDON – European markets closed lower on Friday afternoon after a key US jobs report showed unexpected strength in the labor market.
The pan-European Stoxx 600 closed up 0.8% provisionally, shortly after the Bureau of Labor Statistics release. Tech stocks fell 2.4% as most sectors and major stocks fell into negative territory.
U.S. nonfarm payrolls rose by 528,000 in July, well above the 258,000 projected by Dow Jones estimates and defying signs that the economic recovery is fading.
Investors will interpret the show of strength as an increase in the likelihood that the US Federal Reserve will act more aggressively to reduce inflation, as the risk that such action will tip the economy into recession is reduced.
Markets have traded sideways this week as investors reacted to a flurry of corporate earnings. The European blue chip index closed the previous session fractionally above the flat line.
The Bank of England raised interest rates by 50 basis points on Thursday as it forecast UK inflation to peak above 13% in October and the economy to enter a prolonged recession in the quarter quarter
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In the United States, stocks fell after the jobs report as Wall Street assessed what a strong labor market would mean for the Fed’s rate-tightening campaign.
Asia-Pacific shares closed mostly higher overnight, with Taiwanese stocks leading gains in the region as investors shrugged off China’s military exercises following the visit of US House Speaker Nancy Pelosi in Taiwan.
Profits continued to drive the price movement of individual stocks in Europe. Allianz, Deutsche Post, the London Stock Exchange Group and WPP were among the companies that reported before the bell on Friday.
British financial services firm Hargreaves Lansdown was the Stoxx 600’s top performer, adding nearly 5% after beating profit expectations, while Deutsche Post added 4% after beating profit expectations in second term.
At the bottom of the index, German auto and arms maker Rheinmetall fell nearly 12 percent after cutting its forward guidance on defense orders.
WPP fell nearly 9% after the British advertising giant following its first-half results.
On the data front, French industrial production rose unexpectedly in June, with a strong monthly increase of 1.4% despite forecasts of a 0.2% contraction amid lingering supply chain issues and the energy crisis.
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