Europe close: Disappointing US non-farm payrolls trim gains but equities edge higher

European stocks relinquished most of their earlier gains but managed to close on an upbeat note on Friday, after a largely disappointing US non-farm payrolls report all but guaranteed the Federal Reserve will not hike interest rates this month.

The benchmark Stoxx Europe 600 index closed 0.47% higher, while Germany’s DAX climbed 0.46% and France’s CAC rose 0.73%.

The euro was on the front foot against the main currencies, gaining 0.72% against the dollar and rising 0.14% and 0.33% against the pound and the yen respectively, while Brent crude shed 1.06% to $47.19 a barrel.

US data weighs on European stocks

“Just like yesterday the negative American open had a big knock-on effect for the European indices, with the DAX and CAC almost completely losing the robust gains they had been posting this morning,” said Spreadex’s financial analyst Connor Campbell.

Data released on Friday showed producer prices in the Eurozone fell more than expected in August.

According to Eurostat, producer prices declined 0.8% month-on-month, compared with a 0.2% drop in July and analysts’ expectations for a 0.6% fall.

On a year-on-year basis, producer prices were down 2.6% in August, compared with consensus for a 2.4% decline and a 2.1% drop in the previous month.

Across the Atlantic, a report on non-farm payrolls showed 142,000 jobs were added in September, comfortably below the 201,000 reading analysts had estimated.

Furthermore, revisions to the prior month´s data revealed 136,000 jobs were added, down from a preliminary estimate of 173,000.

“While it’s always important not to over-react to one single data release, we’ll make an exception in this case,” said Paul Ashworth, chief US economist at Capital Economics.

“The chances of a rate hike by the Fed this year just went way down.”

On the corporate front, shares in Telecom Italia lost 2.66% following reports that France's Vivendi has taken steps to raise its stake in the telecoms group to around 19% of the ordinary share capital.

Elsewhere, Air France-KLM climbed 1.39% after the company announced plans for significant job cuts, while Lufthansa rallied 4.06% as HSBC raised the stock to ‘buy’ from ‘hold’.

Volkswagen was under the cosh again and fell 3.71% amid reports that a French prosecutor will open a fraud investigation into the car maker’s diesel emissions. Also on Friday, Credit Suisse said it estimates the cost of the emissions scandal at between €23bn and €78bn.