European Shares Pause After Rally
European shares consolidated on Friday, with uncertainty ahead of key U.S. jobs data making investors reluctant to extend the previous day's rally that was spurred by pledges of continued stimulus from the European Central Bank and Bank of England.
The FTSEurofirst 300 was down 0.1 percent at 1,178.07 points by 1037 GMT in jittery trade.
The index rallied 2.4 percent on Thursday in its best showing in 11 months after the ECB and BoE both offered unprecedented guidance, signalling they were in no hurry to withdraw stimulus.
Banks continued to benefit from expectations of more easy money, with the sector up 0.2 percent. Companies that make money on financial markets also did well, with Aberdeen Asset Management up 2.1 percent, as did real estate firms which rose 0.5 percent.
Stronger-than-expected U.S. jobs data on Friday, though, could revive concerns about the Federal Reserve's plans to scale back its quantitative easing (QE) stimulus if the U.S. economy continues to show signs of recovery.
Equities could sell off if non-farm payrolls data, due at 1230 GMT, beats the consensus forecast of 165,000 new jobs, or if the U.S. jobless rate is below the expected 7.5 percent.
"Typically, when the Fed starts tightening, the markets tend to react around 15 weeks before it and the markets tend to fall around 6 percent. We haven't seen that fully yet, so it's likely that we will see more volatility around the markets second-guessing about when the Fed will tighten," said James Butterfill, equity strategist at Coutts.
But he added that he did not expect the Fed to start scaling back stimulus as soon as September and that, combined with improving economic fundamentals in Europe, could lead to buying opportunities in case of any market dip post payrolls.
Given the risks surrounding the data, volumes were light - at just 27 percent of the 90-day daily average by mid-session, with traders saying that meant any large orders led to disproportionate swings on the broader market.
"If you get really good numbers then it will increase the probability of QE tapering before time, which could create a negative reaction in the short term," said Peter Garnry, head of equity strategy at Saxo Bank.
A payrolls reading broadly in line with consensus would be consistent with a EuroSTOXX 50 level in the 2,660-2,675 area, according to Societe Generale's long-term fair value models, suggesting the euro zone index - last down 0.3 percent at 2,637.42 points - is actually slightly undervalued.
Technical charts also pointed to the scope for more gains.
"We got many new buy signals yesterday in stock market indices in Europe ... This time, the price breakout is technically significant and improves a short-term positive outlook," Jean-Charles Gand, senior market strategist at BBSP Research, said in a note.
To confirm the upwards trend, though, EuroSTOXX 50 needs to move above 2,684 to close a gap left by its May-June retreat.