Europe ends sharply lower on PMIs, U.S. payrolls
LONDON (MarketWatch) -- European stock markets ended sharply lower on Friday, knocked down by a combination of a downbeat euro-zone manufacturing surveys and U.S. payrolls that fell well short of expectations.
The Stoxx Europe 600 index (SXXP) dropped 1.9% at 235.09, its lowest close since December. On a weekly basis, the index dropped 3.1%
The nonfarm-payroll report showed that just 69,000 jobs were added to the U.S. economy in May -- the smallest rise in a year, and well below analyst expectations of a 165,000 increase. The unemployment rate rose to 8.2% from 8.1%. URead more about U.S. jobs in May.
On Thursday, both the ADP jobs report and weekly jobless claims missed analysts' expectations, stoking fears that the U.S. job recovery has stagnated.
U.S. stocks were trading markedly lower on Wall Street. Read more about U.S. stocks in Market Snapshot.
"Given the volatility of the payrolls series, it is tempting to write off this result. But the last three months has seen much softer payrolls, and this may be the real underlying trend, after weather boosted strength in January and February," said Rob Carnell, international economist at ING Bank.
"If so, lower bond yields beckon, even from today's record lows, equities will find it harder still to make forward progress and the euro's decline may slow, though we don't think it will reverse."
Oil firms weighed the most on the pan-European index, with
Drug makers were also under pressure.
The yield on the 10-year German government bond (10YR_GER) fell 0.03 percentage point to 1.17%, according to Tradeweb, while the yield on 2-year German government bond (2YR_GER) temporarily dipped into negative territory for a second day. Yields move in the opposite direction of bond prices.
In Spain, a late round of short-covering pulled down yields, which had pushed toward crisis levels seen late last year. The 10-year yield (10YR_ESP) fell 0.04 percentage point to 6.54%. The IBEX 35 (IBEX) fell 0.2% to 6,080.20, posting a fall of more than 7% on the week.
"The Spanish banking sector is clearly in trouble and the Spanish government is not best placed to help out, given the current yield it must pay to raise capital from the market," wrote Oliver Wallin, investment director at Octopus Investments, in a note. "The future of the euro zone lies with the policy makers, but the silence on that front is deafening. There is little point attempting to second-guess their next move, though, and so we find ourselves in a brief hiatus."
Miners, GSK push FTSE 100 lower
British
The broader U.K. index was weighed down by manufacturing PMI data, which dropped to a three-year low in May, indicating a steeper-than-expected contraction in activity. Read more about May manufacturing PMI plunging to a three-year low.
For the euro zone, manufacturing activity in May shrank at the fastest pace in three years, indicating the region's debt crisis is taking a rising toll on the real economy, economists said. See the euro zone's May manufacturing PMI falling to 45.1.
Meanwhile, data showed unemployment in the euro zone held steady at 11% in April. Read full story on euro zone's April jobless rate.
Across the Irish Sea, Irish voters backed a referendum approving the European Union's fiscal treaty, with 60.3% of voters casting a "yes" vote, according to broadcaster RTE. The Ireland ISEQ General Index (IEGI) ended the day down 2.3% at 4,158.16.
In Germany, the DAX 30 index (DAX) lost 3.4% to 6,050.29, its lowest close since January. On the week, the index lost 4.6%.
Weighing on the index:
The French CAC 40 index (PX1) ended 2.2% lower at 2,950.47.
New car registrations in May fell 16.1% on the year. Registrations for
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