By Barbara Kollmeyer, MarketWatch
MADRID (MarketWatch) -- European stock markets, with the
exception of Germany, saw a strong weekly rise, although a Friday
retreat in the wake of stronger-than-expected U.S. jobs data cut
into gains driven by signs major European central banks will
maintain accommodative monetary policies.
The Stoxx Europe 600 index dropped 1.3% to close at 288.31. The
index extended losses as Wall Street fell after U.S. employment
data reinforced expectations the Federal Reserve will move in
coming months to scale back stimulus.
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 4.6% after Goldman Sachs
added the pay-TV provider to its conviction-buy list. Shares of
Seadrill Ltd. rose over 0.7% 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 previous 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 news conference that interest rates in the region will
remain low or could go even lower for an "extended period."
Ahead of him, the Bank of England, with new Gov. 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
2.4% to 7,806, more than giving back the Thursday rally of more
than 2%. Losses for big names such as Bayer AG and BASF SE , off 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 auto makers 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 offered 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's PSI 20
index down 0.4% to 5,407.32 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 1.7% to 7,868.40, with Banco
Santander SA (SAN) off 2.6%. BBVA SA (BBVA) fell 2.4%.
Greek stocks stood out with a gain. The Athens Composite Index
rose more than 2% to 840.92, trimming its weekly decline to
0.8%.
Mining stocks weighed on London. BHP Billiton PLC (BHP) fell
3.6%, Glencore Xstrata PLC tumbled 6.5% and Rio Tinto PLC (RIO)
dropped 4.4%. The FTSE 100 index fell 0.7% to 6,375.52. 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 futures 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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