European stocks tread water after weaker-than-expected US jobs data

LaToya Harding
·3 min read
Europe is largely quiet as traders await this afternoon’s US nonfarm payroll numbers. Above, Janet Yellen, US Treasury secretary. Photo: Alex Wong/Getty Images
Europe is largely quiet as traders await this afternoon’s US nonfarm payroll numbers. Above, Janet Yellen, US Treasury secretary. Photo: Alex Wong/Getty Images

European stocks tread water on Friday, with the FTSE 100 (^FTSE) closing down 0.12%, falling below the 6,500 mark after a weaker-than-expected US jobs report.

The FTSE itself was somewhat constrained by the strength in sterling as the Bank of England (BoE) indicated on Thursday that negative rates were unlikely, and wouldn’t be introduced for at least six months, predicting a big bounce back in UK GDP.

The pound was 0.44% higher against the dollar (GBPUSD=X) at $1.3729 when European markets closed, but 0.16% down against the euro (GBPEUR=X) at €1.1408.

The pound pushed higher after the Bank of England. Chart: Yahoo Finance
The pound pushed higher after the Bank of England said on Thursday that negative rates were unlikely. Chart: Yahoo Finance

On the continent, the CAC (^FCHI) finished 0.82% up after French president Emmanuel Macron confirmed that a lockdown in country would be the “last resort”, despite the spread of new variants of coronavirus.

Meanwhile, the DAX (^GDAXI) dipped 0.06% lower as factory orders in Germany fell for the first time in eight months in December. Orders slid 1.9%, according to figures from the German statistics office, compared to expectations of a 1% drop.

IG said: "European markets are looking to end the week on a positive footing, with February proving to be a month of bounty for bulls thus far. The UK may be in lockdown, yet investors are looking beyond this period to speculate over exactly who could eventually come back into favour once the economy starts to reopen.

"With the UK vaccination programme ramping up at an impressive clip, traders are favouring those FTSE value names once more. The feeling is that any company which has made it this far is likely to come out the other side, and thus even those stocks with major losses such as airlines and cruise companies are coming into a period of consistent upside.”

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Across the pond, the S&P 500 (^GSPC) and the tech-heavy Nasdaq (^IXIC) hit fresh all-time highs just after the opening bell, and were 0.4% and 0.36% higher respectively, when Europe closed. The Dow Jones (^DJI) had climbed 0.35%.

The indices are set for their biggest weekly gain since the November elections.

It came as America added only 49,000 jobs in January while December’s figures got a significant downwards revision, to -227,000. The unemployment rate also made a surprising drop to 6.3pc last month.

Private payrolls grew by just 6,000 after a 204,000 drop in December, short of the 163,000 expectation, while manufacturing payrolls fell by 10,000. Economists had expected a 30,000 gain.

Hinesh Patel, portfolio manager at Quilter Investors, said: “Despite seasonal expectations, the US employment numbers are a bit of a disappointment.

READ MORE: UK unemployment rate hits highest level since 2016

“This is further compounded by the downward revisions for previous months and paints the picture that not all is well with the US economy despite its dynamism and ability to get through crises. The evidence of the rift between the “haves” and “have nots” is growing and points to a K-shaped recovery – where one group recovers over another.”

Asian shares rose on Friday, taking their lead from a rally in the US, amid hopes for a global economic rebound from the damage caused by COVID-19.

Japan's benchmark Nikkei 225 (^N225) surged 1.54%, posting its best weekly close in over 30 years, while the Hang Seng (^HSI) jumped 0.56% and the Shanghai Composite slipped 0.16% (000001.SS).

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