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European Markets at Close Report

Jul 8, 2016

European Markets at Close Report, by CNBC on July 8, 2016: Europe End 1.7% Up After US Adds 287,000 Jobs in June

Arjun Kharpal, Alexandra Gibbs, Holly Ellyatt

European stocks soared to close sharply higher on Friday, after investors cheered on the news that the U.S. had created 287,000 jobs during the month of June.

The pan-European STOXX 600 finished 1.7 percent higher provisionally; with all sectors posting sharp gains. Despite Friday's success, the turmoil surrounding Brexit pushed the STOXX 600 to close down 1.4 percent on the week.
All major bourses celebrated the news from overseas, with France's CAC and Germany's DAX rallying to close up 1.8 and 2.2 percent respectively.
The U.K.'s FTSE 100 lagged behind however, finishing up 0.9 percent, while its domestically-focused FTSE 250 index jumped 1.75 percent.

US jobs in focus

FTSE FTSE 6590.64 56.85 0.87% 916471213
DAX DAX 9629.66 210.88 2.24% 97029731
CAC CAC 4190.68 72.83 1.77% 115673472
IBEX 35 IBEX 35 Idx 8185.90 177.70 2.22% 243663216

Friday's employment report wowed investors after the Bureau of Labor Statistics announced that the U.S. economy had added 287,000 jobs during the month of June, beating expectations. Economists expected nonfarm payrolls to show growth of 175,000 for the month, according to a Reuters poll. The unemployment rate came in at 4.9 percent, also above expectations.

The figure comes after a disappointing jobs report in May, when the country only created 38,000 jobs. The institution has now revised this payrolls figure down to 11,000. Sterling sank against the dollar following the news, and has since rebounded, trading at $1.2959 at Europe's close.
The jobs data is especially important as the shock slowdown in May hiring was one reason the U.S. Federal Reserve cited for leaving interest rates unchanged at its meeting last month. The Brexit referendum in the U.K. also gave the Fed reason to pause before tightening rates further.
While the impressive figure has boosted markets, especially in the U.S., analysts aren't completely convinced that it will change the near-term outlook when it comes to the Fed and raising interest rates.
"While I wouldn't write off a hike at the end of the year, assuming the jobs data between now and then is very good and wage growth shows signs of improvement, the risks posed by Brexit in the near-term are likely to deter the Fed from tightening and unnecessarily causing further problems for both the economy and financial markets," Craig Erlam, senior market analyst at OANDA, wrote in a note following the jobs release.

Banco Popolare rallies over 16%; Autos speed ahead

Banks were also a key focus for investors, particularly in Italy. Shares of Banca Monte dei Paschi di Siena (BMPS) were over 4 percent higher after the struggling bank said it was "working intensely" with authorities to find a solution for is bad loan portfolio. The lender has been told by the European Central Bank (ECB) to cut its debts by 30 percent of two-and-a-half years.
Banco Popolare said on Thursday that it had conducted internal stress tests which confirmed the banks' resilience to adverse shocks. The news sent the lender to the top of the STOXX 600, over 16.5 percent up.
Goldman Sachs cut its price target for a number of U.K. banks, including Royal Bank of Scotland, Barclays and Lloyds. Despite this, shares in all the banks were sharply higher.
Another top performing sector was autos, up over 3.5 percent. This comes after data from the China Passenger Car Association revealed that vehicle sales in China rose 19.4 percent last month, compared to June 2015. Porsche, Fiat Chrysler and Renault were all above 5 percent each.

Oil prices came under pressure during Europe's afternoon trade, with product glut and slowing economic growth still weighing on the market. Brent and U.S. crude hovered around the flat line, trading near $46.40 and $45 respectively, around 3.30 p.m. London time.
A number of miners got positive ratings from the brokers. RBC raised its price target for Glencore, BHP Billiton and Rio Tinto, helping to push shares of the firms higher.
In individual stock news, France's Sodexo said that like-for-like nine month sales were up by 3.3 percent and it kept its full-year goals. Shares in the firm were over 1 percent up.
London property stocks and housebuilders were some of Europe's best performers, including Taylor Wimpey, Bellway and Bovis Homes Group, all above 7 percent each. This comes despite UBS cuting its price target on all of the stocks.