Europe midday: Stocks maintain gains ahead of payrolls

European stocks were still in the black by midday on Friday as investors looked to the release of the latest US non-farm payrolls report.

The benchmark Stoxx 600 index and France’s CAC 40 were up 0.6%, while Germany’s DAX was 1.3% firmer.

All eyes were on the non-farm payrolls report for August, which is due at 1330 BST, along with the unemployment rate and average earnings.

Victoria Scholar, head of investment at Interactive Investor, said: "US non-farm payrolls are expected to hit 318,000 in August below the addition of 528,000 in July. The unemployment rate is expected to remain at 3.5% amid signs that the labour market remains tight by historic standards. Average hourly earnings are seen falling to around 0.4% month-on-month versus 0.5% in the previous reading. On Wednesday the ADP private employment report saw payrolls grow by 132,000, sharply below the expected 300,000 reading, potentially paving the way for a softer headline reading at lunchtime.

"Investors will be paying close attention to the average hourly earnings figure for clues into the extent to which wages are adding to the inflationary backdrop as the Federal Reserve desperately tries to keep a lid on sky-high price levels. The post-pandemic revival of inflation has lifted the US dollar index to a 20-year high and USD/JPY to a 24-year high amid expectations of further aggressive interest rate increases from the Fed to come, prompting nervousness in the equity markets in recent sessions."

Closer to home, investors were mulling the latest data from Destatis, which showed the German trade surplus narrowed to €5.4bn in July from €6.2bn in June. German exports declined by 2.1% month-on-month in July, while imports fell 1.5%.

ING said: "Trade is no longer a growth driver but has become a drag on German growth. Since the second quarter of 2021, the growth contribution of net exports has actually been negative.

"Global supply chain frictions, geopolitical risks and rising production costs are the obvious drivers behind this new trend. Looking ahead, the outlook for German trade is mixed. There is some relief in supply chains and transportation costs.

"However, at the same time, low water levels, high energy prices and the possible fundamental change in supply chains and production processes on the back of geopolitical uncertainty will be clear obstacles to growth."

In corporate news, Shell was in focus following a report it has shortlisted four candidates to succeed chief executive Ben van Beurden, who is preparing to step down next year after nearly a decade at the helm of the energy firm. Reuters cited two company sources as saying that Shell's board succession committee - headed by Chairman Andrew Mackenzie - has met several times in recent months to draw up plans for van Beurden's departure and interview potential successors.

Elsewhere, Sweden’s Electrolux said it was selling its Russian operations to local management, having decided to exit the country due to the Ukraine conflict.

UK housebuilder stocks were under pressure following a raft of rating downgrades from HSBC.