Little change in European stocks as US equities fall amid strong jobs data

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European stocks closed little changed on Friday while US equities fell after stronger-than-expected jobs data raised chances of an interest rate hike in September.

The FTSE 100 index closed down 0.43 of a point at 10,831.09. The FTSE 250 ended up 88.58 points, 0.4%, at 24,584.71, and the AIM all-share closed up 0.10 of a point at 799.91.

For the week, the FTSE 100 rose 0.4%, the FTSE 250 fell 1.3%, and the AIM all-share fell 1.4%.

In New York, equity markets fell after the jobs report. The Dow Jones Industrial Average was down 0.7%, the S&P 500 was 0.5% lower and the Nasdaq Composite declined 0.4%.

Financial markets reacted to news that the US labour market added markedly more jobs than expected last month.

According to the Bureau of Labor Statistics (BLS), nonfarm payroll employment increased by 162,000 in August, beating the FXStreet-cited consensus, which predicted a 56,000 rise.

In July, employment increased by 21,000, an upward revision from the initial report, which had stated that 23,000 jobs were shed. June’s reading was upwardly revised to 31,000 from 20,000.

“With these revisions, employment in June and July combined is 55,000 higher than previously reported,” the BLS said.

The jobless rate was unchanged at 4.1% in August, as expected.

Average weekly earnings were higher than expected on-year. Average weekly earnings were 3.1% higher year on year in August, cooling from a 3.2% climb in July, but topping the FXStreet-cited forecast of a 3.0% rise.

ING said: “With Fed chair Kevin Warsh describing the US at full employment, this outcome has nudged expectations of a September rate hike higher, but the final decision hangs on next Friday’s inflation print.”

Nancy Vanden Houten, of Oxford Economics, said the strong report was not enough to “cause us to change our call for the Federal Reserve to remain on hold. However, the bar for raising rates is probably lower if the Fed doesn’t see progress on inflation”.

US inflation figures are due next Friday.

Barclays analyst Pooja Sriram expects headline US CPI inflation to remain at 3.4% on-year in August, unchanged from July, with core CPI edging down to 2.4% from 2.5%.

This translates into a forecast of 3.3% annual core PCE inflation – a closely-watched pricing metric by the US central bank – in August, she said.

Barclays’ baseline remains for a 25 basis points hike at the September Federal Open Market Committee (FOMC) meeting, although “we view it as a close call”, Ms Sriram said.

Even a “relatively benign August inflation print in line with our forecast would not, in our view, preclude a September hike,” the Barclays analyst said.

Matthew Ryan, head of strategy at Ebury, noted that following the “blowout” US jobs report, futures are now back to assigning around a 60% chance of a move at the Fed’s September meeting.

But he said next Friday’s CPI data should “carry far more decisive weight and could prove make-or-break for the September decision – a hot print could cement the case for tightening, while a soft one may let the FOMC kick the can down the road.”

On currency markets, the dollar gave back some initial gains following the jobs data.

The pound was quoted at 1.3522 US dollars on Friday, down from 1.3536 dollars on Thursday. It had traded as low as 1.3496 dolars in the wake of the jobs report.

The euro was lower at 1.1614 dollars from 1.1626 dollars. Against the yen, the dollar rose to 156.03 yen from 155.54 yen.

Against the euro, sterling eased to 1.1636 euro from 1.1646 euro.

The yield on the US 10-year Treasury was quoted at 4.78%, widened from 4.75% on Thursday. The yield on the US 30-year Treasury was quoted at 5.24%, up from 5.23%.

In European equities on Friday, the CAC 40 in Paris closed down 0.1% while the DAX 40 in Frankfurt ended 0.2% higher.

In Germany, Volkswagen shares shot up 6.5% as its “future plan 2030” won praise from analysts after unexpectedly securing unanimous supervisory board approval.

Late on Thursday, the Germany-based carmaker said management and unions had agreed to cut a further 50,000 jobs by the end of the decade, bringing planned reductions to around 100,000.

Analysts at Citi called it a “brave plan and a realistic decision for all concerned,” arguing Volkswagen had little alternative given the competitiveness of its German factories and limited opportunities to increase global revenue.

The latest restructuring plan targets a 9% operating margin by 2030, equivalent to around 31 billion euro (£26.6 billion) of operating profit, while cutting its model portfolio by about 50% and manufacturing complexity by around 75%.

On London’s FTSE 100, Computacenter rose 4.1% ahead of half-year results on Tuesday.

Peel Hunt thinks another profit upgrade could be on the cards when the Hatfield-based technology services provider reports. UBS was also positive, reiterating a “buy” rating ahead of the earnings.

Elsewhere, Vodafone rose 2.7% as Goldman Sachs double-upgraded the telecommunications company to “buy” from “sell”, but Experian shed 4.4% after being accused of overcharging customers.

In a post on X, formerly known as Twitter, Federal Housing Finance Agency director Bill Pulte accused the credit-checking firm of overcharging customers in the US.

“Equifax, Experian and TransUnion have been overcharging Americans for far too long. This will end soon. We are seriously considering bi-merge and stronger solutions,” Mr Pulte said.

On the FTSE 250, Renishaw added 5.6% after Bank of America (BofA) raised it to “buy” from “underperform”.

BofA is eyeing further profit upgrades at the Gloucestershire-based provider of manufacturing technologies, analytical instruments and medical devices.

Meanwhile, Genel Energy shares slumped 13% as Norwegian oil and gas firm DNO ASA said it does not intend to make a takeover offer for the exploration and oil production company.

Brent crude for November delivery was quoted at 95.18 dollars (£70.37) a barrel on Friday, down from 96.83 dollars (£71.59) on Thursday.

Gold was quoted at 4,439.40 dollars (£3,283.07) an ounce, down from 4,506.91 dollars (£3,332.99) on Thursday.

The biggest risers on the FTSE 100 were Computacenter, up 220.0p at 5,590.0p, Kingfisher, up 9.8p at 307.4p, Vodafone Group, up 3.3p at 125.6p, Polar Capital Technology Trust, up 13.5p at 652.0p and M&G, up 6.2p at 357.4p.

The biggest fallers on the FTSE 100 were Experian, down 129.0p at 2,814.0p, Coca-Cola Europacific Partners, down 185.0p at 7,870.0p, Relx, down 55.0p at 2,620.0p, 3i Group, down 55.0p at 2,771.0p and IG Group, down 26.0p at 1,335.0p.

Monday’s global economic calendar includes eurozone economic growth figures and German industrial production data. Financial markets are closed in the US for Labor Day.

Monday’s UK corporate calendar includes half-year results from retirement savings provider Standard Life and full-year results from emerging-markets-focused investment manager Ashmore.

Contributed by Alliance News