European stocks extended gains to end sharply higher Friday as investors digested more earnings and celebrated news that the U.S. had added a higher-than-expected 255,000 jobs during the month of July.
The pan-European STOXX 600 finished near session highs, closing up 1.05 percent provisionally, following the impressive set of employment figures. On the week, the STOXX 600, however, showed signs of weakness, finishing 0.15 percent down.
Sectors ended mostly in positive territory, with autos and banks being the top performing sectors. Health care was the only sector to close in the red.
All major European bourses jumped following the news, with the U.K.’s FTSE 100 finishing up 0.79 percent, France’s CAC 40 soaring 1.49 percent and the German DAX closing up 1.36 percent.
After BoE, investors cheer on US jobs figure
Sentiment was geared predominantly towards what was going on in the U.S. during afternoon trade, as the U.S. economy created 255,000 positions in July, according to the U.S. Bureau of Labor Statistics. Economists had been expecting a slightly weaker number than delivered, with economists in a Reuters survey predicting payrolls to increase by only 180,000 jobs during July.
In June, payroll growth was initially reported at 287,000, however the Labor Department revised this figure up to 292,000 in its latest report. For July, the unemployment rate remained unchanged at 4.9 percent. After the report, the U.S. dollar jumped against a number of currencies including the euro and sterling. U.S. stocks posted solid gains on Friday, following the report which exceeded market expectations.
“The July number offers the economy a solid sequel to June’s 287,000 gains and an extra boost after a mixed-bag of corporate earnings these past several days,” Beth Ann Bovino and Satyam Panday, S&P Global Ratings’ U.S. economists, said in a note following the release.
“A steady pace of hiring, healthier consumer appetites and a bounce in producer sentiment paint a brighter U.S. economic outlook amidst ongoing global woes. A solid August jobs report should allow Federal Reserve officials to breathe a little easier when they meet in September and keep them on track for an interest rate hike likely after the U.S. elections in December.”
Elsewhere, markets are still recovering from the Bank of England’s latest decision on Thursday, who cut interest rates for the first time in over seven years to 0.25 percent. The central bank also increased its government bond-buying program, known as quantitative easing, to counter the post-Brexit slump in the U.K. economy.
Novo Nordisk slumps 10%
On the earnings front, insurance and asset management firm Allianz reported 46 percent year-on-year fall in net income attributable to shareholders to 1.1 billion euros, as it was hit by a 352 million euro charge related to the disposal of its South Korean operation. Allianz also said net outflows from Pimco have slowed but it has not reached its goals. Allianz pared some of its losses, closing down 1.4 percent.
However, shares of Lafargeholcim popped 5 percent after it reported core operating profit that beat analyst forecasts and confirmed its outlook for 2016. As was Danish transport firm DSV, jumping 7.3 percent, after second-quarter operating profit beat expectations.
German luxury fashion house Hugo Boss rallied 7.44 percent, after its quarterly operating profit beat estimates, however the retailer said it expected to close 20 more stores as part of its cost cutting drive.
Meanwhile, all was not well for Danish drug maker Novo Nordisk, who trimmed its sales and earnings before interest and tax forecast for 2016 after posting first-half operating profit that missed analyst expectations. Shares tumbled to the bottom of benchmarks, closing down 10.08 percent.
In the commodity space, oil prices were under pressure on the back of a stronger dollar, which spiked following the jobs report. Brent and U.S. crude were both sharply lower at Europe’s close, hovering at $43.68 and $41.33 respectively.
Meanwhile, both spot gold and silver prices tumbled during trade, pushing precious metal firms Randgold Resources and Fresnillo to the bottom of the STOXX 600, both closing down 3 percent or more.
RBS posts big loss
In the banking space, Italy’s Mediobanca reported a rise in net profit in its fiscal fourth quarter and the full year, sending shares up 8.75 percent. And Banca Popolare di Milano (BPM) said second-quarter net profit came in at 110 million euros versus a 74 million euro estimate in analyst poll provided by the bank, according to Reuters. BPM ticked higher, closing over 3.5 percent up.
The Italian banks have, however, been a cause for concern in the euro zone given their large portfolio of bad loans. Government ministers have moved to play down any fear over Italy’s lenders. The Governor of the Bank of Italy Ignazio Visco told Corriere della Sera on Friday that public support for the banks can’t be ruled out.
And Royal Bank of Scotland (RBS), one of the U.K.’s “big four” banks, posted a massive £2.045 billion ($2.7 billion) net loss for the first six months of 2016 on Friday, sending shares over 7 percent down.
Erste Group Bank’s net profit rose in the second quarter helped by a sale of its stake in Visa Europe, sending shares to close just shy of 5 percent up. However the true winner from the banks on Friday was Banca Popolare dell’Emilia Romagna, who saw shares rally some 13 percent after the Italian lender said its core capital ratio had risen sharply, after it won a regulatory approval of internal risk models, according to Reuters.