By Barbara Kollmeyer, MarketWatch
MADRID (MarketWatch) -- Europe stock markets were hanging onto
weekly gains on Friday, with the exception of Germany, but
better-than-expected U.S. jobs data was cutting into a
prior-session rally driven by signs major European central banks
will keep their monetary policies accommodative.
The Stoxx Europe 600 index dropped 1.1% to 288.97, with losses
building as Wall Street fell after that U.S. jobs data. 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. The index is looking at around a 1.4% gain for the week.
Among movers, Sky Deutschland AG jumped over 3% after Goldman
Sachs added the pay-TV provider to its conviction-buy list. Shares
of Seadrill Ltd. rose over 1% after an upgrade to buy from neutral
at Bank of America Merrill Lynch, triggering a more than 2% gain
for the Stoxx Europe 600 heavyweight offshore driller.
Data from the U.S. showed 195,000 jobs were created in June --
beating forecasts -- and employment gains in the prior two months
were stronger than originally expected. Wall Street stocks fell as
investors fretted upbeat jobs data would keep the Federal Reserve
on track for tapering sooner rather than later.
And some investors also thought Europe markets perhaps overdid
the rally on Thursday that came after ECB President Mario Draghi
said in a press conference that interest rates in the region will
remain low or go even lower for an "extended period of time."
Ahead of him, 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.
Coming off the most on Friday, the German DAX 30 index dropped
2.2% to 7,816.44, more than giving back the prior-day rally of
2%-plus. With every stock in the red, losses for big names such as
Bayer AG and BASF SE , off nearly 3% each, took a chunk out of the
index.
Data out of Germany on Friday also showed much
weaker-than-expected manufacturing orders, after a sharp drop in
domestic orders disappointed those hoping to see signs of a
domestic investment recovery.
Heino Ruland, a strategist at Ruland Research in Eppstein,
Germany, said nothing that Draghi said Thursday surprised him very
much and it's very likely that the markets got ahead of themselves.
But also, he said German stocks have been suffering from a string
of weak data out of China.
"The next growth scenario is going to be the recovery of ailing
member states of the euro area, and it's going to pass by Germany,"
said Ruland who added that that means investors may be paying more
attention to automakers in Italy than Germany, where Volkswagen AG
has "a pocket of strength that's looking questionable."
Craig Erlam, market analyst at Alpari U.K., agrees that there
may have been too much excitement on Thursday from those central
bank meetings. He said Draghi gave no real news in hindsight,
noting that the central bank failed to give a benchmark -- date,
unemployment target or growth target -- along with its 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.
Peripheral markets mostly showed losses, with Portugal PSI 20
index down 0.8% to 5,383.88 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.
The Spanish IBEX 35 index fell 1.6% to 7,875.50, with Banco
Santander SA (SAN) off 1.5%. BBVA SA (BBVA) fell 1.7%.
Greek stocks stood out with a gain. The Athens Composite Index
rose over 2% to 841.23, but was still looking at a 1.2% weekly
loss.
Mining stocks weighed on London. BHP Billiton PLC (BHP) fell
3.7%, Glencore Xstrata PLC tumbled near 6% and Rio Tinto PLC (RIO)
dropped 4%. The FTSE 100 index fell 0.7% to 6,377.08. The index
rallied 3% on Thursday, its biggest percentage gain since late 2011
on Thursday.
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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