By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- A stronger-than-expected nonfarm
payrolls report from the U.S. sent European stock markets higher in
afternoon action on Friday, erasing earlier losses fueled by a
downbeat assessment on the German economy.
The Stoxx Europe 600 index rose 0.1% to close at 279.17, after
trading as low as 278.26 earlier in the day. On the week, the index
closed 1.2% higher.
Stocks rebounded in the afternoon after nonfarm-payroll data
from the U.S. showed 146,000 jobs were added to the economy in
November, far exceeding the 80,000 expected by economists polled by
MarketWatch.
The unemployment rate dropped to 7.7% versus expectations for an
unchanged reading of 7.9%.
U.S. stock traded mixed on Wall Street, as consumer-sentiment
data missed expectations.
"I think you have to be careful to read too much into these
numbers [nonfarm-payrolls]. There are in so many ways a lot of
noise in this, with Superstorm Sandy, Thanksgiving and the U.S.
election distorting the data," said Henrik Drusebjerg, senior
strategist at Nordea in Copenhagen.
"More and more people are focusing on the fiscal cliff
negotiations and what I'm mostly worried about is that we'll see
the same turbulence as we saw in August last year during the
debt-ceiling discussions. Back then, markets didn't react before
the uncertainty showed up in the macro data and I'm worried about
the macro data now," he said.
The fiscal cliff refers to automatic spending cuts and tax hikes
slated to take effect in the new year, unless Democrats and
Republicans agree on a deal to avert it.
Among notable movers in Europe, shares of Deutsche Telekom AG
dropped 1.9%, after the firm late Thursday said it would cut
dividends for next year to 0.5 euro ($0.65).
Shares of Norsk Hydro ASA slumped 2.4%, after Nomura cut the
aluminum producer to reduce from neutral.
Drug makers were among best performing sectors, with Sanofi SA
(SNY) and Novo Nordisk AS (NVO) both rising 0.7%. Shares of Roche
Holding AG climbed 0.9% after Morgan Stanley lifted the firm to
overweight from equal weight.
German concerns
Most stocks had earlier in the day traded in negative territory,
as hopes that the European economy will soon recover were dashed,
after Germany's central bank downgraded its forecast for Europe's
largest economy.
The Bundesbank said it now expects gross domestic product to
grow 0.7% this year, but growth will ease to 0.4% next year, down
from its previous estimate of 1.6%. It also said that unemployment
could edge up to 7.2% in 2013 from an expected 6.8% this year,
before falling back to 7% in 2014.
In addition, data showed industrial production for October fell
2.6%, a steeper decline than expected by analysts.
"Germany has been the stronger economy in Europe and signs that
they are struggling are bad for markets," said Richard Perry, chief
market strategist at Central Markets.
"The euro has been hit hard again and is back below $1.30, which
is a psychological level that has been broken," he said.
The downbeat forecasts come just a day after the DAX 30 index
surged to its highest closing level in almost five years on the
back of surprisingly strong factory-order data.
The index closed 0.2% lower at 7,517.80 on Friday, with shares
of Deutsche Bank AG (DB) down 1.1% and Commerzbank AG off 0.8%. The
DAX, however, closed out the week with a 1.5% gain.
Italian stocks underperform
Italy's FTSE MIB index underperformed its European peers, as
questions about how long Prime Minister Mario Monti can last as the
country's front figure started to arise.
Former Prime Minister Silvio Berlusconi's People of Liberty
Party on Thursday withdrew its support for Monti's unelected
technocratic government.
The index sank 0.9% to 15,699.22 and was down 0.7% on the week,
with shares of UniCredit SpA off 1.3%.
Greece's Athens General Index , on the contrary, rallied 1.1% to
840.73 with a 3.9% weekly gain. The Wall Street Journal reported
that Greek banks are prepared to sell back their entire stock of
Greek government bonds as part of the country's debt-buyback
program. Deadline to participate in the plan is at 5 p.m. London
time, or noon eastern.
And in the U.K. shares of mining firms were on the rise, as most
metals prices moved higher after the U.S. labor data. Shares of Rio
Tinto PLC (RIO) rose 0.6% and Antofagasta PLC picked up 0.8%.
The FTSE 100 index gained 0.2% to 5,914.40, sending it 0.8%
higher on the week
France's CAC 40 index gained 0.1% to 3,605.61. It closed out the
week 1.4% higher.
Shares of Publicis Groupe SA rose 0.9%, after the advertising
group said it bought two different agencies in India as part of its
strategy to develop in emerging markets.
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