Europe close: Shares up after surprise rise in US payroll numbers

European shares closed higher on Friday after a higher-than-expected rise in US non-farm payroll numbers last month boosted hopes that downward pressure on wages would help quell inflation and the need for more rate rises.

The pan-regional Stoxx 600 index closed 0.74% higher at 472.26 with all major bourses higher.

The US economy added more jobs than expected in November, according to data released on Friday by the Bureau of Labor Statistics.

Non-farm payrolls rose by 199,000 following an unrevised 150,000 jump in October. Analysts were expecting a 180,000 increase.

Meanwhile, the unemployment rate ticked down to 3.7% in November from 3.9% the month before, versus expectations for it to remain unchanged.

Average hourly earnings rose 0.4% for the month and 4% on the year. The monthly jump was ahead of expectations of 0.3%, but the yearly rate was in line.

"The unemployment rate is trending upwards because rebounding immigration - it fell sharply during the pandemic - is driving rapid expansion of the labor force, more than offsetting the solid employment numbers. This is deeply unusual; cyclical increases in the unemployment rate usually are driven by weakening payrolls," said Ian Shepherdson, chief economist at Pantheon Macroeconomics.

"Either way, increasing slack in the labor market ought to push wage growth down further, consistent with the quits rate returning to its pre-Covid level. Ultimately, that’s what matters for the Fed, because wage growth is the key driver of core services inflation ex-housing, which finally is breaking to the downside but is still too high."

In other economic news, the final estimate of Germany's consumer price index (CPI) confirmed that inflation fell to its lowest in 29 months in November.

In line with the provisional estimates released last week, CPI rose by 3.2% year-on-year last month, down from 3.8% in October, after prices fell by 0.4% during the month, according to Germany's federal statistics office, Destatis.

This was the fifth consecutive month of falling annual inflation, with falling energy prices accounting for a large part of the slowdown, while price pressures on food have also eased.

Energy prices were down 4.5% year-on-year, after a 3.2% annual decline the month before, which mainly reflect elevated prices in 2022 on the back of Russia's invasion of Ukraine. Food inflation meanwhile eased to 5.5% from 6.1%.

The core reading, which excludes the more volatile food and energy costs, stood at +3.8% in November, falling below the 4% mark for the first time since August 2022. Core inflation stood at 4.2% in October.

In equity news, Anglo American slumped by 19% after unveiling plans to cut expenditure by another $500m next year amid a 4% cut in production.

Reporting by Frank Prenesti for Sharecast.com