Investors evaluated the prospects for interest rates as data revealed that US employment growth in the year ending in March was likely far worse than previously reported, which led to a rise in European equities.
At the close, the Stoxx Europe 600 was up 0.3%. The largest laggards were communications equities, with gains coming primarily from the resources, retail, and automotive sectors.
Individual movers included Demant A/S, which increased after Morgan Stanley analysts raised the company twice to overweight, and Alcon Inc., which fell after its second-quarter revenues fell short of forecasts.
With anticipation of a soft landing and a rising belief that the Federal Reserve will remain dovish going forward, European markets have been recovering from a selloff earlier this month.
According to the Bureau of Labor Statistics preliminary benchmark revision, data indicated that the number of workers on US payrolls will likely be reduced by 818,000 for the 12 months through March — or around 68,000 less each month if they are distributed equally. Most economists had predicted a downturn, some even projecting a loss of one million jobs.
Ahead of Fed Chair Jerome Powell’s Jackson Hole address on Friday, investors will now be poring over the minutes of the Fed’s most recent policy meeting, which are expected later on Wednesday, for clues about the direction of interest rates and quantitative tightening.
“The market is supported by share buybacks and buying of systematic strategies in the next days,” said Ulrich Urbahn, head of multi-asset strategy and research at Berenberg. “However, we believe risks are rising again in September, due to the US Presidential TV debate, worsening seasonality and also a higher positioning and less buyback support by then.”
In the meantime, UK government borrowing exceeded estimates in the first four months of the current fiscal year, underscoring the pressure on Keir Starmer’s new Labour government to either cut spending or raise taxes.
