European shares fell on Friday (Jun 7), led by rate-sensitive sectors such as real estate and utilities after a stronger-than-anticipated US jobs report fanned worries that the Federal Reserve would not cut interest rates anytime soon.
The continent-wide Stoxx 600 closed 0.2 per cent lower, but recorded its first weekly gain in three weeks.
The US economy created far more jobs than expected in May and annual wage growth re-accelerated, Labor Department data showed, underscoring the resilience of the labour market and reducing the likelihood the Fed will be able to start cutting rates in September.
“We believe the Fed does want to cut this year, but a cut is unlikely to happen until September at the earliest,” said John Kerschner, head of US securitised products and portfolio manager at Janus Henderson Investors.
“And when they do, it’s likely they message this does not kick off a consistent hiking cycle of 25 basis points (bps) per meeting, but perhaps a more infrequent cadence such as every other meeting.”
Real estate led sectoral losses with a near 3 per cent drop, dragged down by a 7.2 per cent fall in German real estate group Vonovia on a Morgan Stanley rating downgrade.
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Government bond yields, which move inversely to prices, rose across the continent following the US data, with the yield on the benchmark 10-year Bund last at 2.622 per cent.
Helping limit losses, heavyweight health care stocks advanced 0.5 per cent while technology continued its strong run with a 0.4 per cent gain.
A day earlier, the European Central Bank (ECB) delivered a 25 bps rate cut, its first since 2019, joining central banks in Canada, Sweden and Switzerland in easing the monetary policy.
The ECB, however, provided few clues about the future interest rate path, leading traders to scale back bets on additional rate cuts.
Finnish ECB policymaker Olli Rehn said in a blog post that inflation will continue to decline and interest rate cuts will support economic recovery, while Bundesbank president Joachim Nagel said the ECB was not on autopilot mode and was still acting restrictively despite the cut.
Among individual stocks, Swiss banking software firm Temenos rose 5.1 per cent after announcing a new share buyback programme of up to 200 million Swiss francs (S$301.6 million).
Italy’s biggest bad loan company doValue gained 2.7 per cent as it is set to acquire rival Gardant in a deal that includes 230 million euros (S$336.2 million) in cash and the issuance of new shares. REUTERS
