European stocks closed the week lower, influenced by strong US jobs data that heightened expectations for Federal Reserve interest rate hikes. The pan-European STOXX 600 index dipped 0.1% to 648.67 points by 0710 GMT, contributing to an overall weekly decline. Germany's DAX edged up 0.1%, London's FTSE 100 fell 0.1%, and France's CAC 40 dropped 0.2%.
Investors were keenly awaiting the August US nonfarm payrolls report for clues on the Federal Reserve's policy direction. Economists had forecast an increase of 56,000 jobs in August, following a decline of 23,000 in July, with the unemployment rate expected to remain at 4.1%. The stronger-than-expected jobs data pushed up the probability of a Fed rate hike in September to around 50%, a notable increase from 63% the previous day following dovish comments from Federal Reserve Governor Christopher Waller.
In corporate news, Volkswagen shares surged 6% after its supervisory board approved a major transformation plan, including 50,000 additional job cuts, bringing the total to 100,000. This plan, which also targets an operating margin of 9% by 2030, was a significant development given the challenge of securing such approvals from a board with strong labor representation. Other notable movers included Porsche, which benefited from the Volkswagen news, rising 2.9%, Vodafone, up 1.8% after a double upgrade from Goldman Sachs, and Neste, which gained 2.2% following an upgrade to buy at Goldman Sachs. Vivendi, however, saw its shares drop 3.9% after reporting weaker half-year revenues and EBIT.
Sector-wise, the European autos index jumped 1.1% driven by Volkswagen's performance, and technology stocks also performed well. Conversely, economically sensitive sectors such as chemicals and banking fell almost 1% each, weighing on the broader European market index. Media stocks were also down, largely due to Vivendi's earnings report.
