By Tommy Stubbington
European stocks fell Friday, although markets remained on course
for sizable monthly gains on the final trading day of July.
Major indexes were flat for much of the session, but fell after
some disappointing U.S. economic data caused the euro to surge
against the dollar.
A stronger euro is generally bad news for exporters and
multinationals in the eurozone as they earn much of their revenue
abroad.
The Stoxx Europe 600 was 0.5% lower midafternoon. The index was
on track for a rise of more than 3% in July, as Greece's debt
crisis eased and global investors largely shrugged off recent
turmoil in Chinese stocks.
Shares in the U.S. and Europe had fallen sharply at the start of
the week as a slump in Chinese equities spilled over into global
markets, but have since more than recovered those losses as
investors turned to corporate earnings and clues on the timing of a
Federal Reserve rate increase.
The Shanghai Composite Index fell again on Friday, closing out
its worst month in nearly six years.
But markets elsewhere showed little reaction to the latest
decline. Japan's Nikkei index rose 0.3%. In the U.S., the S&P
500 was flat in early trade.
The euro surged against the dollar after the U.S. employment
cost index showed disappointing wage growth, casting doubt on an
imminent Fed rate rise.
The dollar weakened across the board, but the euro made outsize
gains due to the large number of investors with negative bets on
the currency who were caught out by the dollar rise, according to
HSBC currency strategist Daragh Maher.
"The market is desperate to be bullish dollars, so it is
vulnerable to anything that argues against that," he said.
The euro was 1.4% higher against the dollar at $1.1087, making
back its losses from the past three days.
Before the late decline in Europe, investors had focused on the
latest batch of corporate earnings.
Shares in Airbus Group climbed after the plane maker reported a
rise in second-quarter profit, while French bank BNP Paribas and
chemical company Arkema both rose after better-than-expected
results.
Steel pipe maker Vallourec fell after reporting a loss for the
first half of the year.
Among companies on the Stoxx Europe 600 that have so far
reported second-quarter results, 54% have exceeded profit
expectations, according to FactSet data. That compares with 50% in
the first quarter.
"The earnings season in Europe has been pretty good," said
Christian Stocker, an analyst at UniCredit.
But concerns over the Chinese economy are likely to remain, and
could hold back shares in mining companies and car makers in the
coming months, Stocker said.
In commodities, Brent crude oil was 0.7% lower at $52.94 a
barrel. Gold was up 0.8% at $1,097.40 a troy ounce.
Write to Tommy Stubbington at tommy.stubbington@wsj.com