EUROPE MARKETS: European Stocks Pare Gains After U.S. Data, But Germany Still On Track For Record

By Sara Sjolin, MarketWatch Features Dow Jones Newswires

U.K.'s FTSE 100 also aims for record finish

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European stocks trimmed gains in afternoon action on Friday after U.S. jobs data fell short of expectations and raised questions about the strength of the world's largest economy.

The Stoxx Europe 600 Index was up 0.4% at 393.11, after rising as much as 0.8% earlier in the day.

The pullback came after the closely watched U.S. nonfarm payrolls report showed 138,000 jobs were added to the economy in May (http://www.marketwatch.com/story/us-creates-138000-jobs-in-may-unemployment-43-2017-06-02), far below the consensus forecast of 185,000. The unemployment rate, however, fell to 4.3% from 4.4%, the lowest since 2001.

"Despite the poor May returns, the Fed's view of the labor market remains strong enough to support a quarter-point rate hike later this month. But the slowing pace of job growth combined with still-muted wage growth may lead some officials to downgrade their expectations for further policy tightening in the second half of the year," said Curt Long, chief economist at the National Association of Federally-Insured Credit Unions, in a note.

U.S. stock futures also pared gains after the data.

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Individual indexes: Germany's DAX 30 index rallied 1.4% to 12,341.17, beating the previous record set in the middle of May and setting it on track for an all-time closing high.

The U.K.'s FTSE 100 index was also set for a record close, up 0.2% at 7,561.26. The gain came as the pound continued to slide on nerves ahead of next week's U.K. general election. Polls are increasingly pointing to a tight race between Prime Minister Theresa May's Conservative Party and the opposition Labour Party.

Read:5 things to know about the U.K.'s general election next week (http://www.marketwatch.com/story/5-things-to-know-about-the-uk-general-election-next-week-2017-06-01)

And see: U.K. election--the nightmare, best and most-likely scenarios for stocks (http://www.marketwatch.com/story/uk-election-the-nightmare-best-case-and-most-likely-scenarios-for-stocks-worldwide-2017-06-01)

France's CAC 40 index gained 0.7% to 5,353.44, while Spain's IBEX 35 climbed 0.8% to 10,971.40.

Stock movers: Banks were among the biggest beneficiaries of the upbeat sentiment on Friday, with hopes for higher interest rates in the U.S. a boon for the sector. The Stoxx Europe Banks Index gained 0.8%, although trimming gains after the jobs data.

Shares of Credit Agricole SA (ACA.FR) moved up 1.7% in Paris, Deutsche Bank AG (DBK.XE) (DBK.XE) put on 1.5% in Frankfurt, and Barclays PLC (BCS)(BCS) added 0.7% in London.

Shares of Banco Popular Español SA (POP.MC) fell 3.4%, building on a 18% slump from Thursday. That decline came on the back of a Reuters report that a top EU watchdog has warned the Spanish bank it will have to be wound down (https://www.reuters.com/article/us-banco-popular-m-a-eu-exclusive-idUSKBN18R25V) unless it finds a buyer.

Oil companies, however, curbed gains in Europe as crude oil and Brent both plunged more than 2%. The sharp fall came after U.S. President Donald Trump's withdrawal from the Paris Climate Accord sparked concerns of higher U.S. oil production (http://www.marketwatch.com/story/oil-prices-stay-weak-as-investors-return-to-worries-over-rising-production-2017-06-02).

Shares of Tullow Oil PLC (TLW.LN) slid 3.2%, BP PLC (BP.LN) (BP.LN) fell 0.8% and Eni SpA (ENI.MI) gave up 1.2%.

(END) Dow Jones Newswires

June 02, 2017 09:16 ET (13:16 GMT)