Europe close: Cyclicals push higher after US jobs report
By Alexander Bueso
Date: Thursday 02 Jul 2020
(Sharecast News) - Stocks on the Continent finished sharply higher following the release of better-than-expected US non-farm payrolls figures for June.
Nevertheless, many analysts - but not all - remained exceedingly cautious regarding the near-term outlook for America's jobs market, given the possibility that the reimposition of measures to brake fresh Covid-19 outbreaks in various US states might result in slower jobs growth.
And as Michael Pearce at Capital Economics pointed out, US employment remained about 9.6% below where it was at in February.
Chris Beauchamp at IG concurred, telling clients: "You wouldn't know it from the market reaction, but we still have a long way to go, with 70% of the jobs lost during the Covid-19 crisis still unrecovered.
"How long the improvement will continue as we get closer to the expiration of income support benefits remains to be seen, and as noted previously even a softening of the rate of improvement in July and August could be sharply negative for equity markets that are so used to good news and have come so far since March."
Against that backdrop, by the end of trading the benchmark Stoxx 600 had put on 1.97% to 368.29.
The German Dax jumped by 2.84% alongside to reach 12,608.46 while the FTSE Mibtel added 2.88% to 19,886.88.
The Stoxx 600 sector gauge for Banks was the best performing segment of the market, trading up by 4.27%, alongside a 2.54% advance for Travel&Leisure names and a 3.4% jump for Automobiles and Parts.
Still boosting sentiment as well were the recent positive headlines around various potential Covid-19 vaccines, accounting for the strength in travel, and figures showing that new infections in the likes of Germany or Spain remained under wraps.
At the individual company level, Wirecard AG was again to be found at the bottom of the pile on the Stoxx 600, after police and prosecutors raided its headquarters in Munich and various offices in Austria and Germany.
Stock in BAM Groep was also under the cost after the Dutch construction group warned that it would incur in a "significant" loss for the front half of 2020.
Linked to gains in European stocks specifically, IG's Josh Mahony chipped in saying: "The big question is whether we will see the Coronavirus cases kept low enough to allow for increased travel, with another lockdown or resumption of quarantine rules likely to deal a major blow to the travel sector if implemented."
Elsewhere on the economic side of things, euro area unemployment surprised to the downside, printing at 7.4% for May against April's reading of 7.3% and economists' forecasts for 7.7%.
The pace of increase in registered unemployed in Spain continued to slow in June, increasing by 5,107, following a rise of 26,000 for May, while in March and April combined they soared by roughly 300,000.
Nonetheless, the summer months in Spain typically see a sharp rise in hiring - not the opposite.
Producer prices in the Eurozone meanwhile fell at a year-on-year clip of 5.0% in May, which was down from the 4.5% advance seen in April (consensus: -4.6%).
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