Europe close: Shares mixed as investors digest US payrolls

The Stoxx 600, a broad-based European equities index, nudged up by 0.07% to last stand at 458.51 points.

Germany's DAX index trailed behind, declining by 0.49% to 15,869.98 points, while France's CAC 40 dipped slightly by 0.21% to 7,301.33.

In contrast, London’s FTSE 100 performed better, gaining 0.34% to conclude the day at 7,464.54 points.

Currency markets also displayed a divergence in performance, as the euro strengthened 0.12% on sterling to trade at 85.66p, while weakening 0.5% against the dollar to change hands at $1.0789.

“Friday's highly anticipated non-farm payrolls show a surprise rise in US unemployment to 3.8% while wage growth rose less than expected and payrolls rose by more,” said IG senior market analyst Axel Rudolph.

“This suggests that labour market conditions are easing in the US, cementing expectations that the Fed won't hike its rates in September.

“Stock indices rally for the second week in a row, while yields come off their August peaks and the US dollar continues on its upward trajectory.”

Mixed signals across US, eurozone and UK markets

On the economic front, the US labour market turned in a performance that exceeded expectations, but came with caveats that suggested the Federal Reserve might hold off on interest rate changes later in the month.

According to data from the Bureau of Labor Statistics, 187,000 non-farm jobs were added in August, beating the forecast of 170,000.

Those gains were, however, offset by revised data for prior months, as July’s employment increase was adjusted down from 187,000 to 157,000, and June’s numbers were also scaled back from an initially reported 185,000 gain to 105,000.

Adding to the uncertainty was an unexpected uptick in the unemployment rate to 3.8% for August, up from 3.5% in July.

Wage growth also cooled, with average hourly earnings increasing only 0.2% in August, marking the lowest rise since February of this year, and 4.3% year-over-year.

“The US August jobs report shows modest jobs growth, benign wage pressures and a large jump in the unemployment rate as the labour market slackens,” said ING economist James Knightley.

“With inflation set to continue slowing, the Fed is surely not hiking interest rates in September and is unlikely to do so in November either.”

Closer to home, the eurozone manufacturing sector struggled, with new data indicating a prolonged contraction.

Friday's HCOB/S&P Global survey revealed that the Eurozone manufacturing purchasing managers' index (PMI) climbed to a three-month high of 43.5 in August, up from 42.7 in July.

Despite that minor improvement, the sector remained firmly in contraction territory, with the output index also reflecting this trend, registering at 43.4.

Most alarming was the significant drop in new orders to 39.0, one of the fastest rates of decline in the 26-year history of the survey.

That downward pressure was reportedly straining production lines and causing a further contraction in employment and purchasing activities in the region.

“These numbers aren't as terrible as they might look at first glance,” said Dr Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.

“Obviously, the overall PMI manufacturing index, sitting at 43.5, suggests pretty noticeable weakness in this sector.

“However, all of the 12 subindices have moved upwards or remained practically unchanged, showing that the downward trend from the past few months is starting to lose steam across the board.”

In the UK, the housing market meanwhile experienced its steepest annual decline in 14 years, according to fresh data from Nationwide.

House prices plunged 5.3% year-on-year in August, a sharper decline than July’s 3.8% and exceeding expectations for a 3.9% drop.

Monthly data also pointed to a 0.8% decline in August, compared to a more modest 0.3% drop in July, and significantly worse than analysts' predictions for a 0.4% decline.

The average cost of a home in the UK now stood at £259,153, down from £260,828 in the prior month.

Frasers Group, Asos, and Johnson Matthey surge; carmakers and Aurubis decline

In equities, Frasers Group shares climbed a modest 0.12% following the company's decision to increase its stakes in online fashion retailers Asos and Boohoo Group.

That move led to notable gains for the latter two companies as well, with Asos shares surging 2.65% and Boohoo Group seeing an impressive 6.26% hike.

Next also saw its shares move up by 0.52% as the company revealed plans to invest £128m for an additional 21% stake in high-end street retailer Reiss, taking its total shareholding to 72%.

A standout performer in London was Johnson Matthey, whose shares surged 10.44% by the end of trading.

The jump came after Standard Industries nearly doubled its stake in the specialty chemicals group, now holding just over 10%.

On the downside, shares in Frankfurt-listed copper producer Aurubis slumped 6.09%, on the back of a disclosure that the firm had found "considerable discrepancies" in its inventory levels, attributed to theft.

The automotive sector also faced challenges, with shares of Volkswagen Group and Renault both declining substantially.

Volkswagen’s stock dipped 4.25%, while Renault's shares saw a 5.73% drop, after a broker downgrade by UBS, which shifted its rating for both companies from 'neutral' to 'sell'.

Reporting by Josh White for Sharecast.com.