Europe close: Stocks rise despite global tech rout

(Sharecast News) - European shares extended gains and moved close to fresh highs on Thursday despite another sell-off in technology stocks, as investors digested fresh US jobs data.

The pan-European Stoxx 600 rose 1.43% to 648.46.

Germany's DAX gained 2.02% to 25,546.40, France's CAC 40 advanced 1.66% to 8,475.93, and London's FTSE 100 climbed 1.67% to 10,652.87.

In commodities, Brent crude futures were last down 1.12% on ICE at $70.77 per barrel, while the NYMEX quote for West Texas Intermediate declined 1.18% to $67.77.

Chris Beauchamp, chief market analyst at IG, said a weaker US payrolls reading had pushed European indices higher and driven the dollar into reverse.

"It might be the US that's looking forward to a long weekend, but European markets have got in on the act today following the payrolls data," he said.

"The weaker figure sent the dollar reeling and saw Fed rate hike bets reined in.

"As a result, the Vix slumped and European markets took off, most notably the Dax, which saw its first record high in six months."

Beauchamp said Federal Reserve chair Kevin Warsh's hawkish tone had caught markets "on the hop", making any sign that the central bank may not need to rush to raise borrowing costs positive for equities globally.

"The Dow has reached a record high too, but pricey tech stocks continue their disappointing start to Q3," he added.

Oil prices fell further as talks between US and Iranian officials towards a permanent ceasefire appeared to be making progress.

David Morrison, senior market analyst at Trade Nation, said crude had drifted lower as traders continued to look through repeated tit-for-tat attacks between the US, Iran, Israel and Hezbollah, and increasingly assumed that hostilities were effectively over.

"News that some shipping has transited the Strait of Hormuz has also helped to push oil prices down," he said.

"Over the past six weeks or so, Brent crude has dropped around 30%."

Morrison said the oil price was now back around pre-war levels, with traders looking ahead to a market where demand growth continued to slow while production increased.

However, he warned that daily momentum indicators were at extremely oversold levels, raising the risk of a sharp rebound.

US jobless claims fall, but payrolls come in weaker

On the economic front, Americans filed for unemployment benefits at a slower pace in the week ended 27 June.

The Labor Department said initial jobless claims fell by 1,000 to 220,000, while continuing claims rose by 2,000 to 1.81m.

The four-week moving average fell by 2,500 to 222,000, while the insured unemployment rate was unchanged at 1.2% in the week ended 20 June.

The US economy added just 57,000 jobs in June, well below the downwardly revised 129,000 gain recorded in May and short of forecasts for 110,000.

It was the weakest jobs gain in four months.

Professional and business services added 36,000 roles, while social assistance and health care payrolls rose by 25,000 and 22,000, respectively.

Leisure and hospitality employment fell sharply, down 61,000, reflecting softer-than-usual seasonal hiring and likely some impact from the World Cup.

Payrolls were little changed across most other major sectors, including mining, construction, manufacturing, retail, transport, financial activities and government.

Revisions cut a combined 74,000 jobs from April and May totals.

The unemployment rate fell to 4.2% from 4.3%, though it remained slightly above the 4.1% recorded a year earlier.

Morrison said investors had gone into the payrolls release focused on whether the data would strengthen or weaken the case for further Fed rate hikes, with a stronger number likely to support the dollar and a weaker print offering relief to risk assets and the yen.

He said Warsh had again stressed at the European Central Bank forum in Sintra that inflation remained too high, even though he was encouraged by the recent easing of inflation expectations.

"Two weeks ago, Mr Warsh made it clear that inflation, rather than the labour market, was the Fed's prime concern," Morrison said.

"That suggests that investors should be more concerned about a strong payroll update today, as that will boost the probabilities of aggressive Fed rate hikes, rather than the number coming in below expectations."

The dollar fell sharply after the data, extending an earlier pullback from recent highs.

Morrison said the Japanese yen had been the biggest beneficiary of the weaker dollar after USD-JPY hit its highest level in 40 years earlier in the week, increasing speculation that Japan's Ministry of Finance could intervene to support the currency.

In the UK, consumer confidence edged higher in June, although sentiment remained fragile.

The YouGov and Centre for Economics and Business Research consumer confidence gauge rose 0.4 points to 105.3, marking a second consecutive increase and remaining above the 100 level that indicates a positive reading.

Household finance measures improved, with the retrospective gauge rising 1.5 points to 84.0 and the forward-looking measure jumping 2.4 points to 84.1.

Workers also reported stronger business activity over the past 30 days, with that index rising 3.6 points to 108.3, while expectations for activity over the coming year increased 1.2 points to 116.7.

However, perceptions of job security over the next 12 months weakened, with the sub-index falling 3.4 points to 115.3, its lowest level in eight months.

Homeowners also grew more cautious, with views of house prices over the past 30 days falling 3.2 points to 110.8 and expectations for the coming year slipping 0.5 points to 130.0.

Sam Miley, head of forecasting and thought leadership at Cebr, said confidence remained fragile in some areas, particularly around future job prospects.

He said the deterioration likely reflected uncertainty caused by the Iran conflict, tight monetary policy and a loosening UK labour market.

Sodexo in the green, tech stocks join global rout

In equity markets, Sodexo rose 6.88% after the French catering group raised its full-year organic revenue growth forecast.

Technology stocks were under pressure after Samsung Electronics and SK Hynix fell sharply in South Korea overnight, following weakness in the tech-heavy Nasdaq Composite.

The sell-off was linked to Meta's decision to develop a cloud infrastructure business to sell access to computing capacity, chips and AI models, alongside warnings from Oracle that AI investments may not translate into profits.

Swissquote analyst Ipek Ozkardeskaya said Meta's near-9% rally on the news was difficult to justify, arguing that the company had spent heavily, taken on debt and was now moving to a Plan B to make its AI investments worthwhile.

ASM International fell 6.18%, Nokia dropped 5.27%, ASML Holding lost 4.36%, Infineon Technologies declined 1.8%, and BE Semiconductor Industries was down 6%.

Reporting by Josh White for Sharecast.com.