Europe close: Risk appetite falls ahead of long weekend, US jobs report

European stocks fell on Friday, ahead of the long weekend and next Friday´s all-important US jobs report, despite better than expected readings on economic growth and unemployment.

Nevertheless, the euro area slipped further into deflation in April, according to the latest figures from Eurostat.

The benchmark DJ Stoxx Europe 600 index was down 2.13% at 341.48, Germanys’ DAX surrendered 2.73% to end at 10,038.97 and France’s CAC 40 was 2.82% weaker.

Putting a damper on the mood, strategists at Citi downgraded their view on global equities to 'underweight'.

The recent more favourable market backdrop might probably persist for a bit more, the broker said, but it was concerned about the fundamentals for global economic growth and saw potential for a "slight deterioration" with what it termed as the split between real (inflation-adjusted) growth in gross domestic product and inflation.

Up until now the reflation wave from China as authorities there eased, together with a more 'dovish' Federal Reserve, a softer US dollar and restraint in commodity supplies had driven better risk-appetite, Citi explained.

Stocks kicked off the session by taking their lead from the US, where shares ended lower on Thursday as Apple slid after billionaire activist Carl Icahn said he had sold his entire stake in the company, with a stronger yen also weighing on stockmarkets around the world.

Oil prices turned around to trade lower in the backhalf of the session, despite a weaker US dollar. West Texas Intermediate was down 0.634% to $45.74 a barrel and Brent crude was off by 0.61% at $47.85.

According to Eurostat, the Eurozone´s unemployment rate nudged down to 10.2% from 10.4% in February and 11.2% in the same month last year. This marked the lowest rate in the bloc since August 2011.

Economists had been expecting the rate to remain unchanged at 10.3%, which was what it was first estimated at for February.

Pantheon Macroeconomics said this was “a much welcome and surprising decline” in the Eurozone unemployment rate.

“Taken at face value, today’s data indicate that the cyclical recovery remains on track, lifted by domestic demand, and that the labour market continues to improve as a result.”

Eurostat’s preliminary flash estimate of gross domestic product for the region was also encouraging, showing seasonally-adjusted first-quarter GDP rose 0.6% compared with the previous quarter when it grew 0.3%. This was stronger than the 0.4% growth pencilled in by economists.

On a year-on-year basis, seasonally-adjusted GDP was unchanged, up 1.6%, versus expectations for a nudge down to 1.5%.

On the downside, consumer prices declined 0.2% on the year in April, having been steady in March. This was a bigger drop than the 0.1% forecast by economists, with energy prices proving to be the biggest drag as they slid 8.6% on the year.

On the corporate front, shares in AstraZeneca closed lower by 1% after reporting a drop in first-quarter earnings but a rise in revenue as core research and development costs increased, reflecting recent acquisitions.

Sticking with pharmaceuticals, Sanofi was lower despite saying first-quarter sales rose and maintaining its full-year guidance, while peer Novo Nordisk nudged down after cutting its 2016 guidance.

Royal Bank of Scotland was under the cosh after it said first-quarter losses more than doubled to £968m after it paid out a £1.2bn dividend to the UK government. Possible delays in the sale of its US unit Williams&Glynn might lead to a postponement of the lender´s return to dividend payments, analysts said.

Education published Pearson slipped after posting a decline in first-quarter sales.

British Airways and Iberia parent International Consolidated Airlines flew lower. Although the company reported a jump in first-quarter pre-tax profit, it said demand for flights had been hit by the Brussels terror attacks and the upcoming EU referendum.

Shares in Spanish phone company Telefonica were in the red after it said first-quarter profit slumped due to the impact of currency movements while Swiss Re dropped despite posting better-than-expected first-quarter profits.

Danske Bank gained ground after its first-quarter pre-tax profit came in ahead of analysts’ expectations.