European shares were little changed on Friday as investors awaited key US jobs data for further clues on the trajectory of interest rates.
The Stoxx 600 Index erased earlier declines of as much as 0.5% to trade steady as of 11:30 a.m in London, with utilities and media dropping the most, while miners and banks outperformed.
Focus will turn later in the day to closely-watched nonfarm payrolls data in the US after a surprisingly strong private labor report Thursday fueled fresh bets on further interest rate hikes from Federal Reserve and sent two-year Treasury yields to levels last seen in 2007.
Markets have been roiled this week on renewed fears central banks will have to keep interest rates high for longer as robust economic data keep fueling concerns inflation will remain high. After rallying nearly 9% in the first half of the year, the main regional benchmark has declined 3.1% in the first week of July, the biggest decline since mid-March.
“The discussion has shifted from when are rates going to start declining to how many more increases are ahead,” said Luis Garcia, equity portfolio manager at Mapfre AM. “The question is if the market is already immunized to strong economic data, if high-for-longer rates are already priced it or not. Today we will have a good test with the US data.”
Some UK homebuilder stocks including Crest Nicholson Holdings Plc and Barratt Developments Plc declined. Mortgage lender Halifax said UK house prices are falling at their fastest annual pace since 2011 as the property market buckles in the face of rising borrowing costs.
Among individual movers, OSB Group shares plunged as much as 25% after the lender said that it will take a hit of £160m to £180m in the first half of 2023 as customers refinance their mortgages earlier amid higher interest rates. Clariant AG shares rose after the Swiss chemical maker said it was planning more cost-cutting measures to offset weakening demand and lowered its sales forecast less than analysts anticipated.
For more on equity markets:
- Strong Jobs Data Throws a Spanner in Value’s Rally: Taking Stock
- M&A Watch Europe: Coloplast, SimCorp, Network, YouGov, JD Sports
- CAB Payments London Debut Highlights IPO Doldrums: ECM Watch
- US Stock Futures Little Changed; Microsoft Falls
- Man Group Pounces on US Credit Manager Varagon: The London Rush
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Author: Macarena Muñoz