Europe open: Stocks in the red ahead of payrolls; pound in focus

European stocks fell in early trade as investors awaited the release of the nonfarm payrolls report and following a ‘flash crash’ in the pound in Asian trading.

At 0900 BST, the benchmark Stoxx Europe 600 index was down 0.5%, while Germany’s DAX and France’s CAC 40 were off 0.7%.

Oil prices were firmer. West Texas Intermediate was up 0.5% to $50.70 a barrel and Brent crude was 0.5% higher at $52.79.

Meanwhile, the pound was down 1.3% against the dollar at 1.2458, having plunged to below $1.20 in Asian trade.

Spreadex’s Connor Campbell said: “While the pound has recovered the majority of its losses against the dollar (at its nadir it struck 1.18), the event has still spooked investors, leaving sterling with a fresh 31 year low hitting 1.4% decline. Those losses have extended to sterling’s standing with the euro, the currency dropping another 1% to sporadically dip below 1.12.

“There seem to be three main reasons being used to explain the flash crash: 1) it was a fat finger error, 2) it was an issue with algorithmic trading or 3) it was a reaction to Francois Hollande’s comments that the EU has to act firmly with Britain when negotiating the Brexit if it is to protect the ‘fundamental principles’ of the group. Most likely the rapid decline was caused by a mixture of 2 and 3, with thinner than usual trading ahead of this afternoon’s US non-farm jobs report exacerbated the drop.”

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

Societe Generale expects payrolls to have recovered further from their July lull, reaching 200,000 in September.

“Together with the strong ISM non-manufacturing number, this should continue to support our call for a Fed hike in December,” it said.

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’.