European Market Snapshot: Stocks Lower on Disappointing U.S. Jobs Data but Close the Week Up
U.S Non-Farm Payrolls declined by 131,000 in July, worse than economists expected—economists in the Bloomberg survey expected a decline of 65,000. Private payrolls also rose by 71,000 from a 31,000 increase in June but lower than economists expected. The median estimate was for an increase of 90,000. However, as for the more forward looking numbers in the report, average hourly earnings rose 0.2%, more than the 0.1% expectation while average weekly hours rose to 34.2 versus expectation of 34.1. (See RGE CI: U.S. Labor Market: Private Payrolls Anemic; Labor Force Decline Keeps Unemployment Rate Steady).The Stoxx Europe 600 declined 1.06% to 258.71 led by beverage stocks as wheat prices surged to a two year high on concerns over the consequences of a Russian export ban. The composite gained 1.3% for the week.
The German DAX fell 1.2% to 6,260, closing the week up 1.8%. Consumer goods (down 1.82%) led the declines. Heineken declined 3.5% while industrial production fell 0.6% m/m in June, more than economists’ expected. The median forecast by economists in the Bloomberg survey was for an increase of 0.5 %. (See RGE CI: German Industrial Production Contracts in June, but Order Activity Remains Promising).
In the United Kingdom, stocks declined for a fourth day with the FTSE 100 declining 0.6% to 5,332 for a weekly gain of 1.4%. Lonmin (down 5.1%) led the declines after South Africa ordered the company to stop sales of its non-platinum group metals. Industrial production fell 0.5% m/m in June, more than the 0.1% increase economists expected. Manufacturing production was slightly weaker than expected.
France’s CAC 40 lost 1.31% to 3,716, closing the week up 2%. Dexia fell 4.7% after reporting a 12 % drop in Q2 profits. The trade deficit widened from EUR20 billion in the first half 2009 to EUR24.5 billion in the first half of 2010.
In Russia, stocks declined on the U.S. job data and lower oil prices. The MICEX declined 0.8% to 1,403, closing the week up 0.4%. Rosneft fell 1.1% while Sberbank declined 1.8%.
On currencies, all European majors gained against the dollar in European trade. The euro advanced 0.87% to US$ 1.327 while the Swiss franc surged 1.15% to 1.036.
German 10-year bund rose with the yield down 5 bps to 2.512% while the 10-year yield on gilts fell 1.1 bps. Sovereign CDS spreads widened except in Greece where the 5-year CDS spread narrowed 20.6 bps to 762. Corporate (including financials) CDS spreads widened with the iTraxx main up 1.9 bps to 104 bps.
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