By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- European stock markets rallied on
Friday, after U.S. nonfarm-payrolls data beat expectations, leaving
investors questioning if the report would trigger Federal Reserve
reductions in asset purchases.
The Stoxx Europe 600 index jumped 1.3% to close at 295.40.
The solid move on Friday, however, wasn't enough to pull the
index out of red territory for the week, leaving it with a 1.8%
weekly loss.
The index was still up 22% for the past 12 months, boosted by
aggressive easing from central banks, although concerns that the
U.S. Fed could soon start to scale back its stimulus sent markets
lower in recent weeks.
The pan-European index had struggled for direction for most of
the early session, but was sent higher after U.S. nonfarm payrolls
data showed 175,000 jobs were added to the economy in May. The
unemployment rate, however, ticked higher to 7.6% from 7.5%.
Economists surveyed by MarketWatch expected an increase of 164,000
jobs in May and a jobless rate of 7.5%.
"Markets were positively surprised that the data beat
expectations. The ISM index and ADP data earlier in the week
suggested a reading around 100,000 for today's number so
expectations were much lower than consensus estimates. So from a
fundamentals perspective it was a positive surprise, but markets
were also happy that it wasn't strong enough for the Fed to think
about scaling back QE," said Jacob Oubina, senior U.S. economist at
RBC Capital Markets.
"The data suggest that tapering will happen at some time this
year, but not very soon, and it pushes away the thought that it
could happen in the summer. If we maintain this pace in job growth,
just shy of 200,000, it would be enough to usher tapering later
this year. Our call is for October," he added.
Ahead of the data, investors worried that a strong labor report
could push the Fed closer to scaling back its aggressive
asset-purchases program. Fed Chairman Ben Bernanke said last month
that a tapering could begin in coming months if data continue to
improve, fueling worries the $85-billion-a-month liquidity
injection into the market will soon come to an end.
U.S. stocks traded higher on Wall Street.
German data
Back in Europe, data showed industrial production in Germany
jumped 1.8% in April, well above the 0.2% expected by analysts
surveyed by FactSet.
Meanwhile, German trade data showed both exports and imports
grew strongly, raising hopes of more solid growth in the second
quarter.
The Bundesbank, however, cut its 2013 and 2014 growth forecast,
saying much will depend on whether the euro zone emerges from
recession. The central bank lowered its GDP forecast for 2013 to
0.3% expansion from its December estimate of 0.4% and revised its
2014 outlook to 1.5% from 1.9%. Read: Buba cuts German growth
outlook -- but too soon?
The DAX 30 index rose 1.9% to 8,254.68, but ended the week 1.1%
lower.
Shares of Deutsche Telekom AG climbed 1.9%, after the company
said its T-Systems unit won a contract to provide cloud services to
Finnish elevator company Kone Oyj
Banks were on the rise, with Deutsche Bank AG (DB) rising 3.8%
and Commerzbank AG up 1.9%.
Insurance firms were also among notable gainers after Citigroup
lifted the financial-services sector to overweight from neutral.
Shares of Allianz SE added 3.3%, Swiss Re AG gained 3.5% and AXA SA
climbed 4.2%.
The U.K.'s FTSE 100 index gained 1.2% to 6,411.99. On the week,
the index closed out 2.6% lower.
BT Group PLC added 3.7% after Barclays lifted the telecom firm
to overweight from equal weight.
Shares of Severn Trent PLC climbed 2.5%, after a multinational
consortium of funds raised its offer for the water-utility firm, in
its third attempt in less than a month to take the company
private.
Shares of Aberdeen Asset Management PLC fell 1.7%, after Bank of
America Merrill Lynch cut the investment firm to underperform from
neutral.
France's CAC 40 index closed 1.5% higher at 3,872.59, trimming
the weekly loss to 1.9%.
Credit Agricole SA added 2.9% and Société Générale SA picked up
1.8%.
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