Europe midday: Markets higher as eyes turn to US jobs report

European stock markets were mildly higher on Friday despite some mixed manufacturing data, as investors awaited a key jobs report from the US.

Purchasing managers' indices out on Friday showed that the contraction in Eurozone manufacturing continued last month, while Chinese manufacturing activity unexpectedly expanded.

Nevertheless, market sentiment was being dominated by hopes that soft US employment data will prevent the Federal Reserve from further tightening monetary policy at its next meeting later this month.

The pan-European STOXX 600 Index was up 0.36% just after the midday point, with stocks up in London, Milan, Paris and Madrid. Germany's DAX index, however, was more or less flat.

The latest HCOB/S&P Global eurozone manufacturing purchasing managers’ index survey showed that industrial activity in the single-currency area continued to decline in August. The PMI rose to 43.5 in August from 42.7 in July, making for a three-month high, but still well below the 50-point mark that separates contraction from growth.

In contrast, the Caixin China manufacturing PMI rose to 51.0 in August, from 49.2 the month before. This was also comfortably ahead of analysts’ expectations for a reading of 49.3 and marked the highest reading since February.

However, the focus of the day was firmly on non-farm payrolls, which is predicted to show a softening in US job creation to 170,000 in August, from 187,000 the previous month. Meanwhile, the unemployment rate is expected to have remained stable at 3.5% last month.

Hopes have risen in recent days over a potential pause in US monetary tightening after the ADP employment report on Wednesday showed weaker-than-expected job creation last month.

"If today’s non-farm payrolls report shows a similarly modest slowdown in the rate of jobs growth, then there is a very real sense that we could see further gains in stock markets, as bets increase that the Federal Reserve may well be done when it comes to further rate hikes," said analyst Michael Hewson from CMC Markets. "At the very least it could go some way to signalling a pause as the US central bank looks to assess the effects recent rate hikes are having on the US economy."

M&A moves lift London stocks

A host of acquisition and investment newsflow was helping a number of blue chip stocks in London.

Frasers Group was on the rise after raising its stakes in online fashion retailers Asos and Boohoo, causing shares in the latter two to jump.

Sector peer Next please investors with the news it is spending £128m to buy a further 21% stake in premium high street retailer Reiss, lifting its shareholding to 72%.

Meanwhile, Johnson Matthey's stock surged 12% after Standard Industries nearly doubled its shareholding in the specialty chemicals group to over 10%.

In Frankfurt, shares in Aurubis plummeted after the copper producer announced it had found "considerable discrepancies" in inventory levels due to theft.

Carmakers Volkswagen and Renault were hit by a broker downgrade by UBS from 'neutral' to 'sell'.