Europe midday: Stocks gain ground ahead of payrolls report

European stocks edged higher on Friday as investors looked to the release of the latest non-farm payrolls report for any clues on the timing of the next Federal Reserve rate hike.

At midday, the benchmark Stoxx Europe 600 index and Germany’s DAX were up 0.6%, while France’s CAC was 0.5% firmer.

At the same time, oil prices were steady after Thursday’s meeting of the Organisation of the Petroleum Exporting Countries in Vienna failed to yield an agreement on an oil production ceiling. West Texas Intermediate was flat at $49.19 a barrel and Brent crude was up 0.1% at $50.09.

With Brent holding above $50 a barrel, the Stoxx 600 oil and gas index rose 1.4%.

“Today’s US jobs report will take on an increasingly important role over the next month as we seek to see whether the data facilitates the summer rate hike seemingly desired by many at the Fed,” said Joshua Mahony, market analyst at IG.

“The inclusion of the near 40,000 Verizon employees on strike during May will do little to help the cause, yet the Fed are sure to look past this making any reading above 160k pretty respectable.”

Societe Generale said: “The recently settled strike at Verizon combined with a sharp cooling in the ‘management, technical consulting’ sector will likely put a dent in the headline payrolls gain in May.

“We expect an increase of 140k which, excluding the effect of the strike, would be a solid, if unspectacular, result. Meanwhile, earnings should post a decent 0.2% gain and the unemployment rate may have inched down from 5.0% to 4.9%.”

Consensus forecasts are for the report to show that 164,000 jobs were added in May.

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.

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%.