European stocks fell for a third week in four after a stronger-than-expected U.S. jobs report led traders to increase bets on Federal Reserve rate hikes. According to Sina Finance, the Stoxx Europe 600 closed broadly flat and fell 0.8% for the week, its biggest weekly drop in nearly two months.
U.S. August employment growth beat expectations and the unemployment rate was unchanged, indicating labor-market momentum was stronger than previously thought. Traders now see about a 60% chance of a Fed rate hike later this month, compared with even odds on Thursday.
Ecofi equity fund manager Karen Georges said there was little reason for the Fed to take a dovish stance, adding that inflation was rising and the data clearly showed the labor market remained resilient. She also said the market was not paying much attention to macroeconomic data and was still focused on strong second-quarter corporate earnings, so in this environment, good news was good news.
The auto sector led gains, with Volkswagen rising 6.5% after its supervisory board backed a restructuring plan that includes an additional 50,000 job cuts. The technology sector posted the biggest gains, while media and health care lagged.
European investors have turned cautious on the inflation outlook and the possibility of further rate increases. The market is now almost fully pricing in an interest-rate hike by the European Central Bank next week.
Alex
