European share prices steadied on Friday after a bond-driven slide, with softer oil costs and a US jobs report that fell short of forecasts combining to ease trader expectations that the Federal Reserve would tighten monetary policy in the near term.
Bouncing back from a three-month low hit the previous session, the pan-European STOXX 600 index wrapped up the day with a gain of 0.8%. September's payroll figures came in well below analyst forecasts, and data for the preceding two months was revised notably lower, leading traders to scale back expectations of a rate increase at the next Federal Reserve meeting.
Ronald Temple, a managing director at Lazard Asset Management, noted that the underwhelming employment numbers appeared to remove an October Fed rate move from consideration, though he added that two further rounds of inflation data before December's meeting would likely push policymakers toward another round of tightening.
German 10-year bond yields, which serve as a reference rate across the euro zone, fell by more than six basis points to 3.454%. A drop of $3 per barrel in crude prices added further support to broader appetite for riskier assets.
Rising government bond yields worldwide have pushed equity valuations lower over recent weeks, prompting many investors to pull back from higher-risk holdings. Weekly losses for the STOXX 600 persisted through the period, even as the index managed to recover some ground during individual trading sessions.
Gains in technology shares outpaced the rest of the market on Friday, with renewed enthusiasm around artificial intelligence driving the sector forward even as most other industries ended the day in positive territory. Shares in AT&S Austria Technologies & Systemtechnik climbed 10%, those of Infineon Technologies rose around 9%, and both Aixtron and Soitec posted advances of 7.6%.
European bank shares ended Friday little changed, yet the week overall marked their sharpest pullback since April, as mounting concerns among investors over the trajectory of borrowing costs cast a shadow across broader economic conditions.
Euro zone inflation readings for September came in above forecasts, with the trajectory pointing toward further increases over the months ahead. A rate increase delivered by the ECB the previous month was followed by market data from LSEG showing traders had placed the probability of another hike in December at 81.8%, while Morningstar's chief equity strategist Michael Field noted that persistently elevated borrowing costs alongside stubborn inflation tend to weigh on equities, though the degree to which stock markets feel that pressure would hinge on how long investors judge the situation to be lasting.
On Thursday, the French government put forward its 2027 budget, outlining a package of fiscal restraint measures intended to narrow the deficit and shore up investor confidence in government debt ahead of next year's presidential vote. Towards the end of last month, the yield on French ten-year government bonds climbed to a level not recorded since the 2008 global financial crisis.
IG Group, the London-based online trading platform, saw its share price fall 22.6% — placing it at the foot of the STOXX 600 — after the company trimmed its full-year revenue outlook, pointing to a period of muted volatility across trading markets. The share price decline recorded that day was the steepest IG had experienced since December 2016.
Julius Baer's stock added 2% after the Swiss bank unveiled a share repurchase programme worth as much as 600 million Swiss francs — around $724 million.
