MW: European shares end lower after U.S. jobs data
LONDON (MarketWatch) -- European shares ended lower on Friday after weaker-than-expected U.S. nonfarm payrolls data reignited worries about the sustainability of the U.S. economic recovery.
After trading as high as 263.42 early in the session, the Stoxx Europe 600 index (ST:SXXP 258.71, -2.77, -1.06%) declined 1.1% to finish at 258.71 points.
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Investors had been hoping that U.S. jobs data would show strong signs of recovery in the U.S. labor market. Instead, private-sector payrolls rose by a lower-than-expected 71,000 in July.
Total nonfarm payrolls fell by a seasonally adjusted 131,000 in July, but all the lost jobs were temporary jobs at the U.S. Census.
Shares of personnel-services firm Adecco SA (CH:ADEN 55.50, -2.10, -3.65%) fell nearly 4% in Zurich and those of Randstad Holding NV (NL:RAND 34.45, -1.17, -3.29%) dropped 3.3% in Amsterdam.
Of the major regional benchmarks, the German DAX index (DX:DAX 6,260, -73.95, -1.17%) fell 1.2% to 6,259.63 points.
The biggest decliners included Heidelberg Cement AG (DE:HEI 38.30, -1.31, -3.31%) , whose shares slipped 3.8%, and car maker Daimler AG (DE:DAI 41.30, -0.75, -1.77%) , whose shares fell 2.3%.
In France, the CAC-40 index (FR:PX1 3,716, -48.14, -1.28%) ended down 1.3% to 3,716.05, as shares of PSA Peugeot Citroen (FR:UG 22.50, -0.87, -3.72%) dropped 3.7%.
The blue-chip stock indexes in Spain and Portugal both ended down nearly 2%. Shares of Spanish banking giant Santander (ES:SAN 10.11, -0.27, -2.60%) (STD 13.70, +0.16, +1.18%) fell 2.8%.
The U.K. FTSE 100 index (UK:UKX 5,332, -33.39, -0.62%) fell 0.6% to 5,332.39 points.
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Shares of banking group Dexia (BE:DEXB 3.78, -0.19, -4.67%) fell 4.7% after the bank reported disappointing earnings results, while shares of Royal Bank of Scotland Group (UK:RBS 51.20, -0.80, -1.54%) dropped 1.7%, even as the bank reported a return to profit.
"There's no doubt, the U.S. economy is not as strong as we had hoped so, given that, there are concerns. That is one potential for weaker economic growth and therefore earnings," said Oliver Russ, European fund manager at Argonaut Capital.
"We have definitely seen people closing down U.S. overweights and European underweights," he added. "The relative trend of economic data is definitely swinging in favor of Europe which you would expect at this stage of the recovery. Europe's a bit late cycle," he added.
On Friday, data showed Italy's GDP rose 0.4% in the second quarter, with the growth rate unchanged from the first quarter and the Bank of Spain estimated that the Spanish economy expanded by 0.2% in the quarter, up from 0.1% in the first quarter. German industrial production declined 0.6% in June, paring year-to-date growth to 10.9%.
"On the whole, the latest data suggest that the euro-zone is faring surprisingly well for the time being and we have penciled in a 0.8% quarterly expansion in the second quarter," said economists at Capital Economics.
Analysts at Exane BNP Paribas upgraded the mining sector as well as Rio Tinto (UK:RIO 3,432, +2.00, +0.06%) (RTP 54.98, -0.22, -0.39%) and Xstrata (UK:XTA 1,085, +1.50, +0.14%) to outperform. Rio's shares ended little changes, while Xstrata's gained 0.1%.
"Several indicators suggest that the pace of de-stocking is slowing in China, risk aversion is normalizing in Europe and world trade is on a positive trend again," they said. "The sector's relative valuation has become significantly more attractive, both versus other European cyclicals and versus the market as a whole."
In the oil and gas sector, BP (UK:BP. 426.00, +2.60, +0.61%) (BP 41.39, +0.06, +0.15%) shares rose 0.5%. The company said late Thursday that it has completed cementing operations at the Macondo well in the Gulf of Mexico. The operations form part of its effort to stem oil from leaking into the Gulf.
Shares of German specialty chemicals group Lanxess (DE:LXS 40.00, +0.96, +2.45%) rose 3.1% after its second-quarter net profit soared to €131 million from €17 million in the same period a year ago and it raised its earnings outlook.
Still, food and beverage stocks were under pressure, with Heineken (NL:HEIA 33.93, -1.23, -3.49%) shares down 3.5% and Anheuser Busch-InBev (BE:ABI 39.19, -1.57, -3.85%) down 3.9%.
Losses for the sector came after another rise for Chicago Board of Trade September wheat futures. The contract rallied in the previous session after Russia imposed a temporary ban on its grain exports amid a devastating drought. Read story on wheat rally.
Sarah Turner is a markets reporter for MarketWatch in London.
