European shares boosted by U.S. jobs data

Fri Nov 2, 2012 11:44pm IST

* FTSEurofirst 300 up 0.5 percent

* Cyclical miners, autos extend gains

* Dividend concerns hit telecoms sector

By Tricia Wright

LONDON, Nov 2 (Reuters) - European shares rose on Friday after a forecast-beating U.S. jobs report, although near-term index moves were likely to be subdued until the outcome of the U.S. presidential election is known, traders said.

Miners and autos, considered cyclicals as they are heavily exposed to the economic cycle, rose 0.8 percent and 1.2 percent respectively, building on Thursday's strong gains after better economic data in China and the United States.

The FTSEurofirst 300 closed up 0.5 percent at 1,115.19, taking its weekly rise to 1.6 percent, though it ended off a session peak of 1,118.10 hit after the U.S. jobs data.

U.S. employers added 171,000 people to their payrolls last month, outpacing forecasts, while 84,000 more jobs were created in August and September than initially estimated. Other U.S. data was mixed.

The jobs figures, the last before the U.S. presidential election on Tuesday, could lift President Barack Obama's chances at the ballot box, though polls still indicate a close race between Obama and the Republican candidate, Mitt Romney.

"They're good numbers... but for the U.S. economy to get back to the level it was in terms of employment in 2008, you need jobs growth of plus 200,000 per month," Michael Hewson, senior markets analyst at CMC Markets, said.

"Upside is still going to remain limited ahead of next week's election - there's still a bit of uncertainty ahead of that... and obviously as to how much damage there will be from (superstorm) Sandy."

Telecoms were the hardest hit sector on Friday, off 0.4 percent after a media report that Deutsche Telekom is considering cutting its dividend by up to a third from 2013.

The news further eroded sentiment towards a sector once loved for its high dividends in the wake of payout reductions by peers like France Telecom and Telefonica.

A 15 percent drop in revenues in Europe pushed telecom equipment market Alcatel towards a bigger than expected third quarter loss, knocking 5.5 percent off the share price on Friday.

With the third quarter earnings season half way through, 44 percent of companies in developed Europe have missed forecasts and the remainder are expected to undershoot by on average 1.6 percent, according to Thomson Reuters Starmine data.

"U.S. and European equities are caught a little bit in the headwinds of lower marginal earnings in terms of outlook for earnings and lower actual earnings from the last quarter," Saxo Bank Chief Investment Officer Steen Jakobsen said.

"The balance sheet recovery is in great shape but to expect them to continue to improve the balance sheet is probably unrealistic."

The euro zone's blue-chip Euro STOXX 50 was up 0.5 percent at 2,547.15, after a 1.2-percent gain in the previous session.

Some technical analysts see little reason to become overly optimistic even as the index has recent range highs within its sights.

"I'm still pretty cautious because it hasn't broken out yet," Phil Roberts, technical strategist at Barclays, said.

"The minimum you've got to take out is 2,580 (the peak of mid-October), but then you've got the high of 2,611 (March 2012) just above that - then you can get a little bit more expansive."

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