By Barbara Kollmeyer, MarketWatch
MADRID (MarketWatch) -- European stock markets came off some
lofty prior-day highs and stuck to the flat line on Friday as
investors turned their focus to key U.S. nonfarm payroll data due
later.
Stocks rallied strongly the prior session as markets took the
view that the European Central Bank and Bank of England will leave
policy accommodative for some time to come.
The Stoxx Europe 600 index rose 0.1% to 292.49. On Thursday, the
index closed up 2.3%, or 6.69 points, to 292.15, which was the
biggest one-day point and percentage gain since April 23.
Among early movers, Sky Deutschland AG jumped over 5%, while
Peugeot SA gained nearly 3%. Gainers still outpaced decliners
overall.
Thursday's rally was in large part due to ECB President Mario
Draghi, who said in a press conference that interest rates in the
region will remain low or go even lower for an "extended period of
time."
Helping out, the Bank of England, with new Governor Mark Carney
at the helm, triggered the biggest rise for U.K. stocks since the
autumn of 2011 after a statement from the central bank -- in itself
an unusual move -- also eased fears stimulus will be taken away
soon.
But some say markets may be jumping the gun on that dovish
assessment of those central banks.
The German DAX 30 index rose 0.3% to 8,014.80, while the French
CAC 40 index was flat at 3,809.55.
"The statement following the BOE rate decision only claimed that
they will assess forward guidance for August, which in itself tells
us nothing," said Craig Erlam, market analyst at Alpari U.K., in a
note.
Erlam said it was always assumed some sort of forward guidance
will be issued by the U.K. central bank, and it's the details that
matter, of which there were none. "As far as I'm concerned, we're
no more clear now than we were this time yesterday," he said.
Erlam also saw no real news from Draghi either, in hindsight. He
noted that the central bank failed to give a benchmark -- date,
unemployment target or growth target -- along with that lower rate
assessment. "I think what we've seen once again is a commitment to
nothing, and the markets have just taken the bait," he said.
Focus is returning on Friday to U.S. data, with nonfarm payrolls
due at 8:30 a.m. Eastern Time and Wall Street stocks returning to
action. U.S. stock futures remained sharply higher after rallying
in a short session on Thursday. Economists expect the U.S. economy
added 155,000 jobs in June, less than the 175,000 gain the prior
month.
"It will be interesting to see how market participants take to
the jobs data later, whether or not a strong figure will prove to
be bullish or not. It's all become terribly confusing and
contrarian," said Max Cohen, financial sales trader at
Spreadex.com.
Portugal's banks were stepping back from a sharp rally the prior
session, with Banco Comercial Portugues SA dropping 2.2%. The
Portugal PSI 20 index was flat at 5,426.44 after gaining 3.7% on
Thursday.
Portugal's Prime Minister Pedro Passos Coelho appears to have
kept the coalition government from collapsing, though many say the
government remains in a fragile state after four days of political
upheaval sparked by the departure of two ministers.
Mining stocks staged a pullback, with BHP Billiton PLC (BHP),
Glencore Xstrata PLC and Rio Tinto PLC (RIO) all down 1%. Still,
the FTSE 100 index managed a gain of 0.3% to 6,442.12, building on
its biggest point and percentage gains since late 2011 on Thursday.
The index rallied 3%.
Goldman Sachs said in a note Friday that it recommends going
long U.K. equities via the Dec. 13 future for a target of 7,100,
saying the economy looks to be on an upswing and monetary policy
looks set to ease further. It also sees the euro area stabilizing
in the second half of the year.
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