Europe midday: Stocks retreat ahead of payrolls; pound under pressure

European stocks fell on Friday as investors awaited the release of the non-farm payrolls report and following a ‘flash crash’ in the pound in Asian trading.

At midday, the benchmark Stoxx Europe 600 index was down 0.8%, while Germany’s DAX was 0.6% weaker and France’s CAC 40 was off 0.5%. It was a cheerier picture for the UK, however, where the FTSE 100 gained 0.7% as exporters benefited from the weaker pound.

Oil prices were a touch lower but keeping their head above the $50 a barrel mark following reports that some OPEC members and Russia will meet next week to talk about Russia’s involvement in the joint production cut. West Texas Intermediate was down 0.3% at $50.27 a barrel and Brent crude was 0.5% lower at $52.24.

Meanwhile, the pound was down 1.9% against the dollar at $1.2378, having plunged to below $1.20 in Asian trade. Sterling slid as much as 6% to hit its lowest level since 1985 in Asian trade, with market participants speculating that it could have been the result of a faulty algorithm or ‘fat finger’ trade, with low liquidity also thrown into the mix. The plunge coincided with comments by French president Francois Holland, who said the EU should take a tough stance with the UK during exit talks.

Investors were also exercising caution as they awaited the US nonfarm payrolls release and the unemployment rate at 1330 BST.

Joshua Mahony, market analyst at IG, said: “With all the attention paid to the sterling flash crash, it is easy to forget that today was expected to bring volatility for an entirely different reason. The release of US jobs data should help us ascertain the feasibility of a Fed rate hike this year.

“A weak ADP number, coupled with relatively mixed signals coming from the employment element of US PMI surveys means that markets are hesitant to presume a recovery following last month’s low-ball 151k reading. With manufacturing payrolls actually falling in August, it is clear that any outperformance or underperformance will be driven by the crucial services sector.”

On the corporate front, Deutsche Bank was a little firmer following a Financial Times report that the lender is working on a spin-off of its asset management business.

Dutch insurer Delta was also in the black after it rejected a takeover bid from rival NN Group, saying it undervalues the company.

Germany utility E.ON was a high riser following reports that activist shareholder Cevian was mulling the possibility of taking a 10% stake in the company.

Pharmaceuticals giant AstraZeneca edged up after announcing that it sold its rights outside the US for nasal spray Rhincourt Aqua to Johnson & Johnson for $330m.

On the downside, easyJet flew lower again following Thursday’s profit warning, as Bank of America Merrill Lynch downgraded the stock to ‘neutral’ from ‘buy’.