European equities fell further yesterday after US jobs data, while missing forecasts, seemed to strengthen the case for rapidly rising US interest rates, analysts said.
London’s FTSE 100 closed 1.4% down at 7,318.54 points, Paris’ CAC 40 1.0% down at 5,359.36 points and Frankfurt’s DAX 30 1.1% down at 12,111.90 points, while the EURO STOXX 50 closed 0.9% down at 3,345.41 points.
Wall Street was also lower despite a confirmation by the jobs market that the US economy was firing on all cylinders, they added.
The US non-farm payroll for September came in at 134,000 new jobs, far fewer than analysts had expected, but as August figures were revised up, they were “far from a terrible employment number”, said Craig Erlam, an analyst at Oanda.
“This is actually another very good report that other countries will be extremely envious of,” he said.
The data, added Harm Bandholz at UniCredit, “allow the Federal Reserve to continue its policy of gradual normalisation”. But as expectations of higher Fed rates increased, so did US Treasury bond yields, in turn weighing on stock markets because of expectations of higher borrowing costs.
With Treasuries the key gauge for Federal Reserve policymakers when deciding interest rate hikes, markets are growing more concerned that the cost of borrowing will rise more than anticipated, and hit the economy.
“Equities are under pressure as investors fear the Fed will need to tighten policy faster than expected to keep the US economy from overheating,” noted City Index analyst Fiona Cincotta.
This week also saw Fed chief Jerome Powell deliver an assessment of interest rates that added fuel to the fire for many who forecast a quick pace of hikes.
In Europe meanwhile, shares in Danske Bank stumbled in Copenhagen, a day after the lender revealed it was being investigated by the US Department of Justice over possible money laundering related to more than €200bn ($235bn) that had moved through the Danish lender’s Estonian branch.
Denmark’s largest bank is at the centre of a reputational maelstrom and several probes after it said “a large part” of the transactions between 2007 and 2015 were “suspicious”. In a fresh twist yesterday, the Financial Times reported that Danske executed up to €8.5bn of controversial “mirror trades” for Russian customers in a single year, according to an internal memo obtained by the newspaper.
Since the start of the year, shares in Danske Bank have lost almost 40% of their value.
In London, Unilever shares dipped after the Anglo-Dutch consumer giant axed post-Brexit plans to switch its London headquarters to Rotterdam owing to a shareholder revolt.
Shares in the Italian football club Juventus lost 9.92% to €1.19 after a former model alleged that the club’s striker Cristiano Ronaldo raped her in 2009.
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