by Claude Chendjou

PARIS (Reuters) – European stock markets ended higher on Friday and Wall Street was also in the green at mid-session despite the sharp rise in bond yields following the monthly employment report in the United States which showed of a still vigorous labor market.

In Paris, the CAC 40 ended with a gain of 0.88% to 7,060.15 points, thanks in particular to financial stocks like Credit agricole (+2.25%) likely to benefit from a rise in rates. The German Dax advanced 1.06%.

The gains on the British Footsie (+0.58%) were more limited, due to the decline in consumer goods giants such as Unilever (-2.60%) and Reckitt (-1.58%) which could suffer, according to traders, from a change in consumption patterns with the development of anti-obesity drugs.

The EuroStoxx 50 index increased by 1.09% and the FTSEurofirst 300 by 0.74%. The Stoxx 600, which hit a six-month low during the week, gained 0.82%.

Over the week as a whole, the CAC 40 fell by 1.05%, the third consecutive week in the red, while the Stoxx 600 posted a weekly decline of 1.17%.

The main indicator of the week, the employment report in the United States showed 336,000 job creations last month while economists polled by Reuters predicted on average only 170,000.

The publication of this statistic initially frightened investors, fearing that the dynamism of the American economy would encourage the Federal Reserve (Fed) to maintain its rates at high levels for longer than expected. The probability of a 25 basis point increase in Fed rates at the December meeting thus rose to 50% compared to 34% before the employment report.

But as the session progressed, fear on the markets subsided, with investors taking into account in particular the stabilization of the unemployment rate in the United States at 3.8% and wage pressures with a salary hourly increase of 0.2% in September, as in August.

The yield on ten-year Treasuries, which rose to a peak since 2007, at 4.887%, returned to 4.7652% at the close of stock markets in Europe. That of the German Bund of the same maturity followed the movement to finish at 2.882% against a session high of 2.954%.

Statements from several officials at the European Central Bank (ECB) also helped to ease concerns about rates. Klaas Knot estimated that the ECB could achieve its 2% inflation target with the current level of euro zone rates, while Boris Vujcic estimated that the currency bloc’s economy was heading for a soft landing.

VALUES IN EUROPE

On a sectoral level, the insurance (+1.8%), banking (+1.63%) and financial (+1.58%) indices in general recorded the best performances within the pan-European Stoxx 600 .

In Paris, Alstom (-0.82%) showed a further decline the day after the stock fell by more than 35% after lowering its free cash flow forecast.

In London, Aviva jumped 5.33% following information from The Times according to which the British insurer could be bought by a foreign group.

In Amsterdam, Philips fell 6.86%, the Food and Drug Administration (FDA), the American health authority, having deemed the recall procedure for the group’s respiratory devices unsatisfactory.

In Rome, Telecom Italia (TIM) dropped 5.89% due to uncertainties over the support of its main shareholder Vivendi for the proposed agreement with the KKR fund for the sale of its fixed telecoms network, the firm offer of which must be submitted before October 15.

A WALL STREET

At the time of closing in Europe, the Dow Jones advanced by 1.03%, the Standard & Poor’s 500 by 1.09% and the Nasdaq by 1.31%.

Tesla fell by 0.76% after a reduction in its prices in the United States, which raised fears of an impact on its margins.

Exxonmobil lost 1.61% and Pioneer Natural Resources jumped 10.97%, with the two groups in advanced discussions regarding a merger, according to sources.

CHANGES

As in the bond compartment, the dollar is volatile against a basket of reference currencies, fluctuating in a range of -0.3% to +0.4% as currency traders digest the US employment report.

The greenback should, however, end the whole week with a twelfth consecutive weekly gain.

At the close of the stock markets in Europe, the euro rose to 1.0592 dollars (+0.42%) but should again show a weekly decline.

OIL

The oil market is heading towards its biggest weekly decline since March due to fears over demand.

Brent, which rose 0.44% on Friday to $84.44 per barrel, is expected to lose more than 11% over the week as a whole.

American light crude (West Texas Intermediate, WTI), up 0.45% during the session to $82.68, should for its part show a weekly decline of more than 9%.

(Written by Claude Chendjou, edited by Camille Raynaud)

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