European stocks dropped sharply on Friday after investors learned that the U.S. had only added 38,000 jobs in May, well below a Reuters forecast of 164,000.
The pan-European STOXX 600 fell into negative territory, off 0.8 percent, after the U.S. jobs data. The index was up around 0.6 percent before the news. Sectors were mostly lower.
One key point of interest for global investors on Friday has been the latest jobs report out for the U.S. Employers were initially expecting to see a figure of 164,000 jobs in May, according to a Reuters survey, however the nonfarm payroll number sent markets spinning after the figure came in at just 38,000 jobs.
Both the euro and sterling rose sharply against the dollar, after the report. The strength of the jobs data is seen as being a deciding factor on whether the Federal Reserve hikes rates earlier rather than later, with the latest figure casting doubts on a hike in June or July.
“The US Non-Farm payroll data was crazy and completely unbelievable and this is the last set of important data before the Fed meeting. When you look at the data set, it really boggles your mind because the unemployment rate has ticked lower. The productivity picture is even more confusing as it is not increasing,” Naeem Aslam, chief market analyst at Think Forex UK, said in a note.
Elsewhere, European stocks have been digesting the latest news from the European Central Bank, who chose to leave rates on hold on Thursday as expected, while slightly upping its growth forecast for 2016.
On the data front, the latest European services PMIs came out, with Markit’s composite PMI output for the euro zone coming in at 53.1, up from April’s 53.0, indicating economic growth for the region remained subdued.
In the oil space, both Brent and U.S. WTI came under pressure on Friday, slipping below $50 and $49 a barrel respectively. Prices were reacting to the U.S. jobs report, along with news from OPEC which saw its members fail to agree on output targets; however this was seen as price-supportive, as Saudi Arabia pledged not to flood the market with more fuel.
Oil and gas stocks pared most of its gains on Friday, with BP up almost 2 percent after the oil major agreed late on Thursday, to pay $175 million to shareholders over Gulf spill claims.
Aside from the nonfarm payroll data, one market mover was basic resources, with stocks rising on the back of a solid rise in metal prices. Shares of Glencore, BHP Billiton and ArcelorMittal were all trading above 2 percent. However, after the jobs report, Fresnillo and Randgold Resources became top performers, as precious metal prices rallied.
Germany’s RWE lifted the utility sector, up over 5 percent, after Bank of America Merrill Lynch upgraded its stock from “neutral” to “buy”, according to Reuters who cited traders.
Meanwhile in France, Accor popped over 5 percent. The French hotel group was in focus after a French media report said that China’s Jin Jiang was planning to raise its stake in the firm. Accor declined to comment on the rumor.
Near the bottom of Europe’s benchmarks was Airbus fell more than 3 percent. This comes after its H225 LP and AS332 L2 Super Puma helicopters had been grounded by the European Aviation Safety Authority as a temporary precautionary measure, following the discovery of metal fatigue in the gearbox of a Super Puma, which crashed late April in Norway, according to Reuters.
Freenet was one of the STOXX 600’s top performers, up over 5 percent after Warburg Research increased its rating on the stock to “buy”; while Bilfinger sank to the bottom of the benchmarks, off more than 8.5 percent.
Correction: This story has been amended with a corrected quote from Naeem Aslam at Think Forex UK to show the unemployment ticked lower.