European stocks mark worst fall in 2 weeks on U.S. job jitters

(Reuters) – European stocks slipped on Friday as U.S. employment data pointed towards slowing growth in the world’s largest economy, with retail and travel stocks exposed to American markets suffering the most.

The pan-European STOXX 600 index slipped 0.6%, marking its worst fall in two weeks after data showed the U.S. economy created the fewest jobs in seven month in August. Global equities also tumbled after the data.

Retail stocks were among the worst performers for the day, dropping 0.9%. Bookseller WH Smith, which makes at least a quarter of its earnings from U.S. customers, was the worst performer in the sector, down 3.4%.

Travel stocks sank 1%.

The laggard U.S. data was attributed to a rise in the highly contagious Delta variant of the coronavirus. But analysts saw a bright side in the reading, specifically that weakness in the job market would give less impetus to the Federal Reserve to rein in liquidity measures.

“Friday’s weaker-than-expected jobs puts less pressure on the Fed to taper its stimulus, which is likely to provide a short-term boost for stocks. The stock market loves stimulus and any indication that the Fed will remain fully accommodative is good news for investors,” said Jay Pestrichelli, CEO of ZEGA Financial.

European technology stocks were the best performers for the week, up nearly 2% as investors fled to sectors most resilient to disruptions caused by the pandemic.

A private survey also showed activity in China’s services sector contracted sharply in August as restrictions to curb the COVID-19 Delta variant threatened to derail the recovery.

But euro zone business activity remained strong last month, IHS Markit’s survey showed, suggesting the bloc’s economy could be back to pre-COVID-19 levels by year-end despite fears about the Delta variant of the coronavirus and widespread supply chain issue.

The European Central Bank will meet next week amid calls from several hawkish members to slow down its pandemic-era purchases programme. A Reuters poll sees the bank announcing a cut to its asset purchases, given a recent spike in inflation.

Payments company Nexi slipped 0.8% after Italy’s competition watchdog said it had opened an investigation into the company’s planned merger with domestic rival SIA.

Spanish fund distribution firm Allfunds jumped 11.7%, and was the best performer on the STOXX 600 after its maiden first-half results beat expectations.

German exchange operator Deutsche Boerse is expected to announce new entrants to the blue-chip DAX index on Friday, part of the index’s biggest ever overhaul.

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