European shares hit file highs, weak US wages hit tapering bets
© Reuters. FILE PHOTO: The graphic of the German share index DAX is shown on June 3, 2021 on the Frankfurt Stock Exchange. REUTERS / employees
By Ambar Warrick and Sruthi Shankar
(Reuters) – European stocks closed at record highs on Friday as weak US payrolls indicated lower chances of monetary tightening anytime soon, while optimism about an economic recovery in the euro area boosted most sectors.
The pan-European index rose 0.4% to a new closing high of 452.57 after hitting an all-time high of 452.71. It added 0.8% for the week.
Technology stocks rose 1.2% and were the best performers of the day, led by Austrian chipmaker AMS.
The company's shares rose 4.4% after it announced the sale of its North American digital systems business to US Acquity Brands.
Global stocks rose after data showed US non-farm payrolls rose less than expected in May, causing many to dampen expectations for restrictive signals from the Federal Reserve. (MKTS / GLOB)
The Fed has cited inflation and labor market health as two key factors needed to tighten monetary policy.
The data comes ahead of the Fed and European Central Bank political meetings next week, where investors will be on the lookout for any signs of tapering their extensive bond-buying programs.
Both banks are widely expected to keep their policies unchanged.
"It is too early for the ECB to give any indication of any form of monetary tightening, even if economic growth improves," the analysts at BCA Research wrote in a press release. "While headline inflation surged above the central bank's 2% target in May, core inflation only rose to 0.9%."
However, recent European data has shown that the economy is heating up rapidly after last year's COVID-induced lull.
The subdued outlook for lending rates weighed on government bond yields, which in turn caused European bank stocks to fall 0.9%.
The bank-heavy Spanish benchmark index also lost 0.6%.
European auto stocks performed best this week, up more than 5% as positive sales and production data from major American automakers Ford and General Motors (NYSE 🙂 boosted the sector.
British Airways owners IAG (LON :), Wizz Air and easyJet (LON 🙂 stocks slipped between 0.9% and 3.3% after the UK removed Portugal from its green list of quarantine-free travel destinations and added seven countries, including Egypt and Sri Lanka, on its "red list", which requires hotel quarantine when returning to England.
Ryanair slipped 0.8% despite its CEO forecasting unrestrained movement between Europe and the UK from July.
French media giant Vivendi (OTC :), which owns Universal Music Group, slumped 0.3% after news billionaire William Ackman's Pershing Square Tontine in early talks to buy 10% of the music label for around $ 4 billion had gained.
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