Europe open: Stocks edge higher as China recovers; payrolls eyed

European stocks edged higher in early trade, recovering from big losses this week following a stabilisation in Chinese markets, as investors looked to the release of key US jobs data.

At 0900 GMT, the benchmark Stoxx 600 was up 0.4%, France’s CAC 40 was 0.5% higher and Germany’s DAX was up 0.6%.

China’s Shanghai Composite rose just under 2% on Thursday as investors welcomed the suspension of the circuit breaker mechanism that halted trading twice this week. The mechanism was widely criticised by analysts for exaggerating declines as investors rushed to exit positions before getting locked in by the halts.

“Despite a highly volatile overnight session, it seems removing the trading limits have had the desired effect. Also, the People’s Bank of China raised its yuan/USD fixing rate for the first time in nine days and this has helped to reassure investors,” said SpreadCo analyst David Morrison.

“There are hopes that the worst may be over and cautious buyers are creeping back in. However, we should expect further volatility until investors can have more confidence that this week’s sell-off has been nothing more than a healthy correction rather than the start of a protracted bear market.”

As the situation in China stabilised, mining stocks advanced following a veritable beating earlier in the week, with the Stoxx 600 basic resources index up 1.7%.

Corporate news was hard to come by on Friday.

In London, BHP Billiton pushed higher after saying the amount of mining waste spilled as a result of a dam burst at its Samarco joint venture iron ore mine in Brazil last November was a lot less than previously thought.

In macroeconomic news, data released by Destatis showed German industrial production fell 0.3% in November from 0.5% in October, coming in well short of economists’ expectations for a 0.5% increase.

Meanwhile, production rose 0.1% from the same month the previous year, weaker than the 0.4% increase registered in October.

In separate data released on Friday, Destatis said seasonally-adjusted German exports rose 0.4% in November compared with a 1.3% drop in October, while imports were up 1.6% versus a 3.2% decline the previous month.

Exports were a touch below economists’ expectations but imports were a little better.

This narrowed the foreign trade surplus to €19.7bn from €20.5bn.

On the year, exports increased by 7.7% from 3.2% the previous month, while imports were up 5.3% compared with 3%.

Elsewhere, figures showed French industrial production fell 0.9% in November from the previous month, which was steeper than the 0.4% drop expected by economists.

Still to come on the data front, investors will eye the all-important nonfarm payrolls release at 1330 GMT, along with the unemployment rate.

“As we come to the end of an incredible first week of trading in 2016 attention will now shift towards this afternoon’s US December employment report, which to some extent probably no longer carries the importance that was attached to it throughout 2015, now that we’ve got that first rate hike out of the way,” said Michael Hewson, chief market analyst at CMC Markets.

"That’s not to say that it’s no longer relevant, it is, but the focus now has shifted towards the pace of inflation, and wage growth or the lack thereof, along with speculation as to how many further rate rises could be in the pipeline further down the track, at a time when inflationary pressures remain muted.”

Following Wednesday’s better-than-expected ADP report, expectations of a good number have increased a little, with numbers in the region of 200,000 being touted, Hewson said.

At 1500 GMT, US wholesale inventories and job openings are due.