Europe close: Stocks mixed as strong US data fuels rate hike expectations

(Sharecast News) - European stock markets finished in mixed fashion on Friday after a crucial US jobs report raised the odds of an interest rate hike by the Federal Reserve.

The pan-European Stoxx 600 benchmark settled 0.1% higher, with flat finishes in London and Zurich met with losses in Milan (-0.3%) and Paris (-0.1%) and gains in Frankfurt (+0.2%).

US non-farm payrolls came in hotter than expected in August, according to the Bureau of Labor Statistics, rising by 162,000 against economists' expectations for a 53,000 increase. Upward revisions to June and July also added a further 55,000 jobs to prior estimates, reinforcing the sense that hiring momentum has been firmer than previously reported.

Dovish comments from key Fed members earlier this week had lifted hopes that the central bank may delay a potential rate hike. However, the latest figures could complicate matters for policymakers concerned that the economy may be running hotter than expected.

"Employers added jobs at the fastest pace in five months, beating forecasts by a wide margin, while upward revisions to previous months further strengthened the labour market and increased expectations of a September Fed rate hike," said Axel Rudolph, chief technical analyst at IG.

Back in Europe, economic data revealed that eurozone retail sales fell unexpectedly in July, falling 0.6% compared to forecasts for a 0.3% increase. That followed 0.2% growth in July and marked the largest decline since May 2025.

The S&P Global eurozone construction PMI fell to 43.0 in August, down from 44.3 in July, marking the 52nd straight monthly contraction across the sector. While momentum began to pick up in Germany, where the reduction in activity was its softest over the year to date, the decline in France picked up to its steepest rate since May 2020 as new orders tanked.

Meanwhile, German factory orders rose 2.5% monthonmonth in July, according to the Federal Statistical Office, marking a third consecutive increase and comfortably beating expectations.

Oil prices were more or less flat at $95.38 a barrel, but were still elevated as the US seemed incapable of extricating itself from its war of choice with Iran. Brent crude moved beyond $96 a barrel earlier this week as hostilities between the two nations ramped up.

In equity news, shares in Volkswagen jumped on the announcement of the biggest restructure in its 89year history, involving a total of 100,000 job cuts and halving the number of models produced. The measures come in response to mounting pressure from Chinese rivals, high energy costs and the expensive shift to electric vehicles.

Chip stocks performed well as volatility across the sector continued, with ASM International, ASML, Computacenter and Infineon Technologies all posting solid gains.