STOXX 600 gains 0.4% on weak US jobs data, rate-cut hopes

The STOXX 600 rose 0.42% to 660.97 points as a weaker-than-expected US jobs report raised hopes the Federal Reserve can hold off on rate increases. The eurozone STOXX 50 index added 0.45% to 6,531.80 points, touching 6,559.99 after the payrolls release, and climbed about 4.2% for the week. The FTSEurofirst 300 gained 0.43% to 2,641.28.

"The weak payrolls print may ease the pressure on the Fed to raise rates at its September meeting, but next week's inflation data will still likely be the deciding factor," said Ellen Zentner, chief economic strategist at Morgan Stanley Wealth Management.

US employers cut 23,000 jobs last month, defying expectations for growth, according to the Labor Department, which also revised June and May payrolls down by a combined 103,000. The softer labor market signal pushed the 10-year Treasury yield down to 4.65% from 4.67% before the release, and the two-year yield to 4.20% from 4.22%. Markets now price a 42% chance of a rate cut in September, down from 55% on Thursday.

Healthcare was the strongest sector, with the index climbing 1.3% as Danish biotech Genmab surged 7.2% after raising its full-year guidance on stronger first-half revenue. Insurers lagged, falling 0.6%, with Munich Re down 3.7% despite reporting a 6% increase in second-quarter net profit that beat expectations.

Oil prices kept a lid on gains, with Brent crude trading around $83.47 a barrel after Iran, coordinating with Oman, proposed rules that could restrict vessels considered hostile from using the Strait of Hormuz, a waterway that carries about a fifth of the world's oil and gas. The rise in crude has renewed inflation concerns, a factor that has kept European equities from pushing further into record territory.

Wall Street followed the softer jobs data higher, with the S&P 500 up 0.6% and the Nasdaq composite up 1.1%, as Nvidia jumped 2.3% and Broadcom rose 1%. Airbnb climbed 15.4% after reporting stronger-than-expected quarterly profit and revenue. The gains came after a mixed Thursday session in which the S&P 500 slipped 0.18% and the Dow Jones Industrial Average fell 0.85%.

European equities had touched record highs earlier in the week before oil-driven inflation worries trimmed gains. The STOXX 600 remains on track for a fourth consecutive weekly advance, while the STOXX 50's weekly gain of 4.2% is its largest in months. Eurozone business activity climbed to an eight-month high in July, with a final composite PMI of 52.0, as a recovery in services accompanied a strengthening manufacturing sector.

The STOXX 50's weekly advance is supported by a resilient earnings season and hopes that softer labor data will keep the Fed from tightening further. Nearly 90% of companies in the S&P 500 have reported results, with analysts expecting profit growth of about 50% overall. Investors now turn to US inflation figures due next week, which will shape expectations for the Fed's September 15-16 meeting and determine whether European equities can extend their record-setting rally.

This article is for informational purposes only and does not constitute investment advice.