Europe Stocks Fall as Dismal Payroll Data Stoke U.S. Growth Fear

European Stocks Turn Negative
  • U.S. employers added 38,000 jobs in May, missing forecasts
  • BP advances after settling claims over Gulf of Mexico spill

European shares tumbled as investors considered the implications of disappointing U.S. jobs data that cast doubt on the strength of the world’s biggest economy.

The Stoxx Europe 600 Index slid 0.9 percent to 341.29 at the close of trading, posting a weekly drop of 2.4 percent, its first in four. Shares erased earlier gains after the payroll data missed forecasts. Peripheral markets in Italy, Spain and Portugal fell the most. After slipping as much as 5.4 percent from an April 20 high, European shares had recovered momentum at the end of May as better-than-forecast U.S. data fueled optimism that the economy could cope with higher interest rates. But, progress stalled this week amid resurgent worries about global growth.

“That was very disappointing and adds a lot of uncertainty to a market that was gearing up for a summer rate hike from the Fed,” Allan von Mehren, chief analyst at Danske Bank A/S in Copenhagen, said, referring to the jobs report. “It makes people question the real strength of the labor market. Really terrible timing, as confidence was just tentatively returning to the market.”

U.S. employers added 38,000 workers in May -- the fewest in almost six years -- reflecting broad cutbacks that may raise concern about growth and prompt Federal Reserve policy makers to reconsider the trajectory of borrowing costs. Officials at the central bank will announce their next rate decision on June 15. Traders are now pricing in a 4 percent chance of an increase this month -- down from 22 percent before the jobs data -- and a 29 percent probability in July. The dollar slid the most since December.

Automakers posted the biggest decline of the 19 industry groups on the Stoxx 600 amid concern that the euro’s gain against the greenback will hurt exporters. Banks were also among the worst performers, led by lenders from peripheral nations.

BP Plc rose 1.3 percent after agreeing to pay $175 million to settle claims by U.S. investors that its managers lied about the size of the 2010 Gulf of Mexico oil spill. BHP Billiton Ltd. and Glencore Plc rose 3.5 percent or more, contributing the most to an advance for miners as metals climbed.

Among other stocks moving on corporate news today, Accor SA gained 6.7 percent, the most since November 2011, after Le Figaro reported that Jin Jiang International (Holdings) Co., the French hotel operator’s biggest shareholder, wants to boost its stake in the company to 29 percent.

RWE AG added 4.7 percent after Bank of America Corp. recommended buying shares in the German power producer because of rising power prices and reduced tax. ICAP Plc climbed 1.5 percent after winning a contract worth $65 million over three years to provide technology for China’s official inter-bank trading platform.

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