The European markets extended losses from the previous session on Friday, after the highly anticipated U.S. jobs report for June showed a smaller than expected increase. Most investors seem to be of the opinion that the U.S. jobs report was not weak enough to prompt any action by the Federal Reserve. Another cause for concern was today's increase in the yield of 10-year Spanish government bonds back above the 7 percent level.
Thursday's surprise interest rate cut by China, for the second time this year, and monetary policy decisions by the European Central Bank and the Bank of England failed to inspire investors. The ECB announced a reduction in interest rates to a historically low level and the BoE decided to raise the size of its asset purchase plan by GBP 50 billion to GBP 375 billion.
The global economic outlook has become more worrisome over the past few months with deteriorating investment, employment and manufacturing in Europe, the U.S., Brazil, China and India, International Monetary Fund Managing Director Christine Lagarde said Friday. She also said the lender will downgrade the global growth forecast in its upcoming report.
Delivering the Nikkei Symposium Keynote Speech in Tokyo, Lagarde said, "In the IMF's updated assessment of the world economy, to be released ten days from now, the global growth outlook will be somewhat less than we anticipated just three months ago."
The Euro Stoxx 50 index of eurozone bluechip stocks declined by 2.13 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, lost 0.83 percent.
The DAX of Germany dropped by 1.92 percent and the CAC 40 of France finished lower by 1.88 percent. The FTSE 100 of the U.K. decreased by 0.53 percent and the SMI of Switzerland fell by 0.30 percent.
In Frankfurt, Daimler declined by 3.39 percent. Volkswagen fell by 2.45 percent and BMW lost 4.52 percent.
Commerzbank decreased by 3.40 percent and Deutsche Bank finished down by 5.05 percent.
In Paris, Peugeot sank by 7.71 percent. The car maker reported a 15 percent decrease in European sales in the first half of the year. Shares of Renault fell by 2.45 percent.
Societe Generale dropped by 5.73 percent, Credit Agricole lost 4.61 percent and BNP Paribas fell by 3.95 percent.
In London, Aviva climbed by 1.37 percent. The company announced its decision to sell part of its shareholding in Delta Lloyd NV. Societe Generale also upgraded its rating on shares of Aviva to "Hold" from "Sell."
Marks & Spencer is due to release its trading update early next week. The stock declined by 3.40 percent. Shares of the Burberry Group dropped by 3.44 percent and Kingfisher fell by 2.03 percent.
Royal Bank of Scotland decreased by 2.75 percent and Barclays lost 2.05 percent.
In Zurich, Roche announced that it has received pre-market approval from the U.S. FDA for a new test to assess a patient's viral load of cytomegalovirus. The stock ended the session higher by 0.24 percent.
Germany's industrial production rebounded in May with better-than-expected growth that was driven by strong activity in the construction sector even as the euro area struggles to recover from the deepening sovereign debt crisis.
Seasonally adjusted industrial production increased 1.6 percent from April, when it decreased a revised 2.1 percent, data from the Federal Ministry of Economy and Technology showed Friday. The rate of expansion surpassed the 0.2 percent growth economists had forecast.
Output price inflation in the U.K. eased to its lowest level in nearly three years in June as falling prices of crude oil and imported metals allowed manufacturers to reduce charges to cope with weak demand. The output price index for home sales rose 2.3 percent year-on-year, after the 2.9 percent increase in May, the Office for National Statistics said Friday. Economists had expected prices to rise 2.4 percent.
France's merchandise trade deficit decreased more than economists expected in May, data released by the Directorate General of Customs and Excise showed Friday. The trade deficit decreased to EUR5.33 billion in May from EUR5.77 billion in April. Economists were looking for a shortfall of EUR5.5 billion. In May 2011, the trade balance was a deficit of EUR6.73 billion.
Employment in the U.S. increased for the twenty-first consecutive month in June, according to a report released by the Labor Department on Friday, although the pace of job growth for the month fell well short of economist estimates. The Labor Department said non-farm payroll employment rose by 80,000 jobs in June compared to economist estimates for an increase of about 100,000 jobs.
Despite the continued job growth during the month, the unemployment rate remained unchanged at 8.2 percent, in line with economist estimates.
by RTT Staff Writer
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