European shares drop on caution ahead of US payrolls report

By Shubham Batra

(Reuters) -European shares slipped for a fifth straight session on Friday as caution prevailed ahead of the crucial U.S. jobs data, the last such labour market report before the Federal Reserve’s monetary policy decision on Sept. 18.

The pan-European STOXX 600 index fell 0.6%. The index has dropped 3% so far this week, and is set to snap its four-week winning streak.

Germany’s DAX index was down 0.7% after data showed the country’s industrial production fell by 2.4% in July, compared with analysts’ prediction of a 0.3% drop.

The UK’s benchmark FTSE 100 slid 0.5%. British house prices rose by 0.3% in August from July versus an expected rise of 0.2% on the month.

Energy stocks were the biggest drag on the markets, declining 1.1% as oil prices hovered near 14-month lows, followed by rate-sensitive banks that fell more than 1.2%.

All eyes will be on the U.S. non-farm payrolls data at 1230 GMT which is expected to show the American economy added 160,000 jobs in August, compared with 114,000 in July. The unemployment rate is seen falling to 4.2% from 4.3%.

“Due to the mixed economic signals, along with the focus on Fed’s interest rate cuts, the market reaction to this report is difficult to predict,” said Kathleen Brooks, research director at XTB.

“There are some who argue that this payrolls report is a downside risk for U.S. stock markets whatever the outcome.”

Money markets currently see a 57% chance of a 25-basis point cut by the U.S. central bank in September and a total easing of 111 bps by the end of 2024.

The euro zone’s revised GDP data for the second quarter is due at 0900 GMT.

Among stocks, Raiffeisen Bank fell 7.4% after a Russian court froze the shares of the lender’s Russian unit, which the company had planned to spin off.

Volvo (OTC:VLVLY) Cars was down 4.1% to a seven-month low. The Swedish automaker slashed its margin and revenue ambitions for a second time in a year on Thursday, a day after it abandoned its EV-only target by 2030.

Airbus declined 1.1% after Europe’s air safety regulator ordered inspections on engines of its A350-1000 jets following an engine fire on a Cathay Pacific flight earlier this week.

France’s Elis slipped 16% after a report that the workplace supplies provider approached Vestis, the former uniform rentals business of Aramark, with an acquisition offer.

On the flip side, Poland’s InPost rose 8.2% as it decides whether it will use its call option for the remaining stake in Britain’s Menzies by the end of this year.