European shares on Friday fell after a stronger-than-expected US jobs report ramped up bets of another 75-basis-point-rate hike by the US Federal Reserve next month, while fears of a darkening growth outlook pushed shares towards weekly losses.
The pan-European STOXX 600 was down 0.76 percent to 435.72, extending losses from earlier in the day after US nonfarm payrolls were shown to increase by 528,000 jobs last month, the largest gain since February.
The benchmark has lost 0.59 percent this week, snapping two weeks in positive territory, on worries over dour economic data from the region, rising geopolitical tensions and fears that higher interest rates could tip the economy into a recession.
“The data published this week add to the evidence that a recession is just around the corner,” Capital Economics senior Europe analyst Jack Allen-Reynolds said.
Figures this week also showed eurozone retail sales plunged in June and factory gate prices continued to rise, while eurozone business activity contracted last month for the first time since early last year.
“Forward-looking indicators suggest that worse is to come... If we are right, the European Central Bank will raise interest rates more aggressively than is currently priced into the market, and the economy will underperform consensus forecasts,” Allen-Reynolds said.
Britain’s FTSE 100 also closed lower, but a weakening pound helped the UK blue-chip index log its third consecutive week of gains.
The FTSE 100 dipped 0.11 percent to 7,439.74, with shares in WPP PLC, the world’s largest advertising group, falling 8.8 percent after its annual sales outlook failed to excite investors expecting stronger forecasts.
The midcaps index finished down 0.5 percent as the global mood soured after a solid US jobs report for last month bolstered the case for the Fed to press ahead with interest rate hikes.
Still, the FTSE 100 marked weekly gains of 0.22 percent, as sterling came under pressure after the Bank of England (BoE) on Thursday warned of a long UK recession even as it raised interest rates by the most in 27 years.
The index has several global companies that draw a large part of their revenue overseas, so a weakening sterling benefits the stocks.
The central bank raised its Bank Rate by a half percentage point to 1.75 percent — the highest level since late 2008 — in an attempt to control soaring inflation, but said Britain would enter a recession at the end of the year and not emerge until early 2024.
“Central banks generally tend to soft soap when it comes to bad news, however the frankness behind the BoE’s economic assessment was as dark as it could be,” CMC Markets UK chief market analyst Michael Hewson said.
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