By Sara Sjolin, MarketWatch
LONDON (MarketWatch) Better-than-expected numbers on U.S. jobs growth sent European stock markets rallying on Friday, with banks and resource firms leading major indexes higher.
The Stoxx Europe 600 index /quotes/zigman/2380150 XX:SXXP +0.19% gained 1% to close at 274.11. The index closed the week up 2.1%, the best weekly performance since early September.
Unemployment rate falls to 7.8%
The U.S. unemployment rate fell to 7.8% in September, the lowest level in more than 3 1/2 years. Payrolls increased by 114,000.
Nonfarm payrolls are dominating today. Technically markets remain fairly bullish with all major indexes in the world pretty much staying in an uptrend channel, said Richard Perry, chief market strategist at Central Markets.
Risk-sensitive sectors such as oil firms and banks were among the biggest advancers.
HSBC Holdings PLC /quotes/zigman/13843 UK:HSBA +0.33% /quotes/zigman/207333/quotes/nls/hbc HBC -0.33% /quotes/zigman/13834 HK:5 -1.11% added 1.2% and BNP Paribas SA /quotes/zigman/132292 FR:BNP +1.24% gained 3.5%.
Oil firm BP PLC /quotes/zigman/210014 UK:BP +1.18% /quotes/zigman/247026/quotes/nls/bp BP -0.34% rose 0.6%, Frances Total SA /quotes/zigman/167958 FR:FP 0.00% /quotes/zigman/167990/quotes/nls/tot TOT -0.72% gained 1%, and Italys ENI SpA /quotes/zigman/286034 IT:ENI +0.87% climbed 2.3%.
European stocks jumped after labor data from the U.S. showed 114,000 jobs were added to the economy in September and the unemployment rate unexpectedly dropped to 7.8% from 8.1%, hitting the lowest level since January 2009. The August number for job creation was further revised up to 142,000 from an original estimate of 96,000. See: Jobless rate falls to 7.8%, lowest since 2009
The numbers are important because the U.S. is the biggest economy in the world and the nonfarm payrolls report is a big gauge of U.S. employment. If the consumer is getting more money to spend on goods, it will also help drive global trade, Perry said.
Minutes from the Federal Reserves latest meeting showed late Thursday that a weak labor market was one of the main reasons the central bank pulled the trigger on its third round of quantitative easing. See: Weak job picture, uncertainty drove QE3: minutes.
Perry, however, didnt expect solid jobs data to steer the central bank away from quantitative easing or make the program short-lived.
The Fed committed to buy $40 billion in securities a month, regardless of the near-term employment situation. And its too early to see the effect from QE. We havent had a full month to pass and nonfarm payrolls are backward looking, he said.
U.S. stocks rose on Wall Street in midday trade. See: U.S. stocks up on largely upbeat jobs data
Europe's week ahead
Financial markets continue to wait and see if Spain will make a formal aid request while Greek leaders continue discussions with international creditors. Burberry's trading update will give some insight into the state of the luxury sector.
Central banks hold rates
Asia markets were mostly higher overnight, although Japanese shares wobbled after the Bank of Japan refrained from announcing further stimulus measures. See: Asian stocks gain, Japan wobbles after BOJ.
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