European shares extend losses as hot US payrolls flare rate worries
2024.06.07 09:57
By Shristi Achar A and Shashwat Chauhan
(Reuters) – European shares extended losses on Friday, dragged down by rate-sensitive sectors such as real estate after a hotter-than-anticipated U.S. jobs report fanned worries the Federal Reserve would not cut interest rates anytime soon.
The continent-wide was last down 0.5%, hitting session lows after the data, but is poised to clock its first weekly gain in nearly a month.
A report from the U.S. Labor Department showed job growth increased far more than expected in May, which is likely to keep the Fed from starting to cut interest rates at least until September.
“(The NFP) were surprising on the upside, but the unemployment numbers narrate a different view,” said Eugenio Aleman, chief economist at Raymond James.
“We’ll have to wait and see what the next couple of months look like because the Fed is not going to relent to lowering interest rates with such a strong labour market.”
Real estate led sectoral losses with a near 3% drop, dragged down by a 6.9% fall in German real estate group Vonovia on a Morgan Stanley rating downgrade.
Most STOXX 600 sectors traded lower, with utilities, which is also a rate-sensitive sector, shedding 1.6%.
Government bond yields across the continent also perked up following the data, with the yield on the 10-year bund, considered as the region’s benchmark, last at 2.619%.
The data comes at the heels of the European Central Bank’s rate verdict on Thursday when it delivered a 25-basis-point rate cut, its first since 2019, and joined its counterparts in Canada, Sweden and Switzerland in easing the monetary policy.
The central bank, however, provided little clues about the future interest rate path, causing traders to scale back bets of additional rate cuts.
Finnish ECB policymaker Olli Rehn said in a blog post that inflation will continue to decline and interest rate cuts will support economic recovery, while Bundesbank President Joachim Nagel said the ECB was not on autopilot mode and was still acting restrictively despite the cut.
Among individual stocks, Temenos added 3% after the Swiss banking software firm announced a new share buyback programme of up to 200 million Swiss francs ($224.92 million).
Italy’s biggest bad loan company doValue advanced 4.5% as the company was set to acquire rival Gardant in a deal that includes 230 million euros ($250.59 million) in cash and the rest in stock.
