Europe midday: Stocks stay down after uninspiring data, ahead of payrolls

6th Sep 2024 11:06

(Sharecast News) - European stocks were still in the red by midday on Friday as nervousness crept in ahead of the key US non-farm payrolls report and after the release of uninspiring eurozone and German data.

The benchmark Stoxx 600 index and France's CAC 40 were both down 0.4%, while Germany's DAX was 0.6% lower.

Russ Mould, investment director at AJ Bell, said: "Today's release of new US jobs data could have a significant influence on the direction of shares around the world. Concerns about economic weakness in the US have already led to two big shockwaves on the stock market in the past few months, and there is a potential for more tremors if the data looks bleak.

"Futures prices point to a weak opening for Wall Street on Friday, including a 1.2% decline in the Nasdaq. That factor, along with a tick-up in the gold price, suggests that investors are extremely nervous. Add an increase in the Vix measure of market volatility into the mix and you've got a potential recipe for an extremely choppy session today.

"The Federal Reserve looks hard at employment trends when it decides on interest rates and jobs data is also important to the US presidential campaign. The Democrats have been bigging up a resilient economy and Kamala Harris won't want to see a big slowdown in the country, as that could fuel Donald Trump's criticisms of his election rival.

"America added a lower-than-expected 114,000 jobs in July, which has encouraged hopes for interest rate cuts. The market consensus for August is 160,000 job additions and for the unemployment rate to fall from 4.3% to 4.2%.

"Watch out for any revisions to the historic data. Downward changes to preliminary estimates tend to portend of a slowdown or recession."

The non-farm payrolls report for August is due at 1330 BST, along with the unemployment rate and average earnings.

Closer to home, figures released earlier by Destatis showed that German industrial production fell by 2.4% on the month in July, versus expectations for a 0.3% decline.

This left production 2.2% lower than its average level in the second and 9.5% below the its most recent peak reached in February 2023.

Destatis said production declined in most sectors of manufacturing, although the drop in the automotive industry had a particularly negative impact on overall performance, down 8.1% month-on-month following growth of 7.9% in June.

Carsten Brzeski, global head of macro at ING, said: "Today's data is a cold shower for everyone hoping for a speedy recovery. In fact, it suggests that the bottoming out of industry still has a long way to go. We've already got weak sentiment indicators, and the risk of yet another quarter of stagnation or even contraction has clearly increased."

Elsewhere, figures from Eurostat showed the eurozone economy expanded only marginally in the second quarter as growth struggled to take hold.

Seasonally-adjusted GDP increased by just 0.2% in the second quarter in both the eurozone and wider region.

That was down on Eurostat's first estimate of 0.3% and on first quarter GDP, which was 0.3% in both zones.

Eurostat also released labour data, which showed the number of employed people increased by 0.2% in the eurozone and by 0.1% in the wider EU in the second quarter.

On the corporate front, Rolls-Royce fell again after the European air regulator announced an inspection of the UK firm's Trent XWB-97 engines following this week's Cathay Pacific incident.