European Markets Finished Mostly Lower After Weak U.S. Jobs Report

(RTTNews) - The majority of the European markets ended Friday's session in negative territory, after the U.S. job growth for May came in weaker than anticipated. The markets were relatively flat ahead of the report, but steadily declined after its release. However, the markets pared their losses in late trade.

The disappointing U.S. jobs report triggered a weakening in the U.S. dollar and a surge in the value of the Euro. The currency move had a negative impact on shares of European exporters at the end of the trading week.

The weak U.S. jobs data also has shifted the opinion among investors on the outlook for a June rate hike by the Federal Reserve. Most now believe that the Fed will be unable to follow through with an interest rate hike following the weak job growth. The shift in opinion weighed on shares of European banks, but sparked a rally in shares of gold and mining stocks.

Partly reflecting the impact of a recent strike by Verizon (VZ) workers, the Labor Department released a report on Friday showing much weaker than expected U.S. job growth in the month of May. The Labor Department said non-farm payroll employment edged up by just 38,000 jobs in May compared to economist estimates for an increase of about 158,000 jobs.

The report said the unemployment rate still fell to 4.7 percent in May from 5.0 percent in April, although the decrease came as people left the labor force. The unemployment rate had been expected to dip to 4.9 percent.

Germany's economic growth momentum remains robust, supported by domestic demand and a strong labor market, but the biggest euro area economy is set to expand at a pace slower than those projected earlier due to sluggish exports, the Bundesbank said Friday, while lowering its growth and inflation forecasts.

The German economy is set to grow 1.7 percent this year, the German central bank said in its semi-annual report. The forecast was lower than the 1.8 percent predicted in December.

The growth projection for next year was slashed to 1.4 percent from 1.7 percent. The economy is likely to expand 1.6 percent in 2018, the bank said. The French economy is set to grow slightly slower than previously projected next year, the Bank of France reported Friday.

In the biannual economic outlook, the bank said gross domestic product will expand 1.5 percent next year instead of 1.6 percent. The outlook for this year was maintained at 1.4 percent.

The Euro Stoxx 50 index of eurozone bluechip stocks decreased 1.20 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, lost 0.95 percent.

The DAX of Germany dropped 1.03 percent and the CAC 40 of France fell 0.99 percent. The FTSE 100 of the U.K. gained 0.39 percent and the SMI of Switzerland finished lower by 0.70 percent.

In Frankfurt, utility RWE surged 4.71 percent after Bank of America Corp. gave the stock a 'Buy' rating.

Deutsche Bank declined 3.94 percent and Commerzbank fell 2.42 percent.

Volkswagen decreased 2.94 percent and BMW lost 2.48 percent. Daimler also finished lower by 2.38 percent.

In Paris, Accor jumped 6.73 percent on a report that China's Jin Jiang plans to hike its stake in the hospitality major to 29 percent.

Airbus Group dropped 3.53 percent after Europe's air safety regulator grounded Airbus H225 LP and AS332 L2 Super Puma helicopters following the discovery of a potentially catastrophic gearbox fault afflicting both types.

BNP Paribas decreased 2.50 percent and Credit Agricole surrendered 2.58 percent. Societe Generale also closed down by 1.70 percent.

Renault declined 3.87 percent and Peugeot fell 2.83 percent.

In London, energy giant BP climbed 1.54 percent after agreeing to settle a class-action lawsuit.

ICAP gained 1.54 percent after signing a $65 million deal to provide technology for China's main fixed income and foreign exchange trading system.

Marks & Spencer finished unchanged after JPMorgan downgraded its rating on the stock to "Underweight" from "Neutral."

Mining stocks turned in a strong performance. The disappointing U.S. jobs report has investors doubting that the Federal Reserve will be able to hike interest rates this month. Fresnillo surged 7.57 percent and Randgold Resources jumped 6.84 percent. Anglo American increased 5.17 percent and Glencore rose 5.52 percent. BHP Billiton also climbed 3.48 percent.

The euro area private sector activity expanded more than initially estimated in May but growth remained subdued, final data from Markit showed Friday. The final composite output index rose to 53.1 in May from 53.0 in April. According to flash estimate, the score fell to 52.9 in May.

Eurozone retail sales remained flat unexpectedly in April, data from Eurostat showed Friday. Retail sales remained unchanged in April from March, when it declined by revised 0.6 percent. Economists had expected a 0.4 percent rise for April.

The U.K. service sector growth strengthened more-than-expected in May but the pace of expansion was one of the weakest seen over the past three years, survey data from Markit Economics showed Friday. The Markit/Chartered Institute of Procurement & Supply Services Purchasing Managers' Index climbed to 53.5 from a 38-month low of 52.3 in April. The score was forecast to rise marginally to 52.5.

The Chinese private sector activity expanded at a slower pace in May as the service sector growth slowed from April and manufacturing output declined, survey data from Markit showed Friday. The Caixin composite output index came in at 50.5 in May, down from April's 50.8, signaling the weakest pace of expansion in the current three-month sequence of growth.

The services sector in China continued to expand in May, albeit at a slower pace, the latest survey from Caixin revealed on Friday with a services PMI score of 51.2. That's down from 51.8 in April.

With imports rising more than exports, the Commerce Department released a report on Friday showing that the U.S. trade deficit widened in the month of April.

The report said the trade deficit widened to $37.4 billion in April from a revised $35.5 billion in March. The deficit had been expected to widen to $41.0 billion from the $40.4 billion originally reported for the previous month.

Reflecting a jump in orders for commercial aircraft, the Commerce Department released a report on Friday showing that new orders for U.S. manufactured goods increased by the most in six months in April. The Commerce Department said factory orders surged up by 1.9 percent in April after climbing by an upwardly revised 1.7 percent in March. The continued increase in orders matched economist estimates.

Growth in U.S. service sector activity slowed by much more than expected in the month of May, according to a report released by the Institute for Supply Management on Friday. The ISM said its non-manufacturing index fell by 2.8 points to 52.9 in May after climbing by 1.2 points to 55.7 in April.

While a reading above 50 continues to indicate growth in the service sector, economists had expected the index to show a more modest drop to 55.5.