Europe close: Stocks fall back as euro jumps on weak US jobs report

European stocks ran into a wall of selling at the end of the week, in the form of a much weaker-than-expected reading on the state of the US Jobs market in May.

US non-farm payrolls rose by a meagre 38,000 in that month, undershooting economists´ forecasts for a rise of 160,000 by a very wide margin.

“History suggests that payroll growth slowing persistently below its expansion-average points to higher risk of a recession. Since 1960, when payroll growth has dipped persistently below its recovery-period average, the US economy has more often than not found itself in an NBER-defined recession 9 to 18 months in the future,” Barclays´s Michael Gapen said in a research note sent to clients.

A near two percentage point jump in the value of the euro against the US dollar contributed to the DJ Stoxx 600´s late 0.89% slide to end the day 3.06 points lower at 341.29, Germany’s DAX fell 1.03% to 10,103.26, while France’s CAC was 0.99% lower to 4,421.78.

Somewhat ironically, Friday´s losses in European stockmakets came close on the heels of weekly fund flow data, from EPFR and Bank of America-Merrill Lynch, which revealed the first inflow into global equities in eight weeks.

Cyclicals bore the brunt of selling, with the Stoxx 600 Auto&Parts gauge finishing down by 2.38% for the day and a similar gauge for banks´shares retreating 2.20%.

Euro area economy stuck in low gear, Markit says

On the European data front, Markit’s final Eurozone composite output index came in at 53.1 in May, up from the flash estimate of 52.9 and April’s reading of 53.0.

The upturn was again led by the service sector, which saw a modest growth acceleration. Manufacturing production also rose, albeit at a slightly lesser pace than the previous month.

Meanwhile, the final Eurozone service business activity index printed at 53.3, up from the flash estimate and April’s reading, both of which were 53.1.

Chris Williamson, chief economist at Markit, said: “The final PMI numbers for May have come in slightly ahead of the earlier flash readings, but still point to a Eurozone economy which seems unable to move out of low gear. The survey data are signalling a GDP rise of 0.3% in the second quarter, suggesting the growth spurt seen at the start of the year will prove frustratingly short-lived.

“June looks likely to prove equally disappointing, as inflows of new business slowed in May to the weakest for almost one-and-a-half years.”

Retail sales in the 19 countries that share the euro were stable in April from March compared with expectations of a 0.3% increase, according to Eurostat.

Food, drinks and tobacco sales rose 0.5%, while non-food products remained stable and automotive fuel decreased by 0.1%.

On the year, Eurozone retail sales were up 1.4%, missing forecasts of a 1.9% rise.

Corporate news was thin on the ground.

Oil giant BP was on the front foot after it agreed to pay $175m to settle claims by US investors that its managers lied about the size of the Gulf of Mexico oil spill.

Stock in German power producer RWE AG tacked on 5% after analysts at Bank of America-Merrill Lynch recommended clients buy its shares.

AstraZeneca was in the black after announcing the completion of its licensing agreement with Ironwood Pharmaceuticals for the exclusive US rights to the drug.

French hotels group Accor was a high riser after Le Monde reported that China’s Jin Jiang was considering upping its stake to 29%.