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Reckitt Rally Boosts European Stocks as Traders Digest US Jobs

(Bloomberg)

(Bloomberg) -- European stocks snapped a three-day losing streak as Reckitt Benckiser Group Plc rallied by the most in 24 years and investors weighed the outlook for the US economy as payrolls rose less than expected.

The Stoxx Europe 600 Index gained 1.1% at the close in London. Reckitt surged as much as 12% in its biggest jump since March 2000, as a US jury verdict cleared it and Abbott Laboratories over claims they hid potential risks of their premature-infant formulas. The gains also boosted the personal care sector.

European stocks posted their biggest monthly decline in a year in October, as a glum batch of corporate earnings raised worries about the economic outlook. Focus is also on the US election and the Federal Reserve’s meeting next week for clues on the outlook for interest rates.

Data Friday showed US hiring advanced at the slowest pace since 2020 last month, while the unemployment rate held at a low level in a month distorted by severe hurricanes and a major strike.

“Today’s report shows that the labor market is not in danger of overheating, so will likely provide investors with some reassurance that while rates may be lowered slowly, the downward trajectory should continue,” said Richard Flynn, managing director at Charles Schwab UK.

In the UK, bonds fell, extending losses this week after the Labour government’s pivotal budget and plans for additional bond sales unleashed a wave of selling.

“In Europe, markets will be focusing on the selloff in UK bond markets and whether this will continue to be a controlled repricing or turn into a less orderly phenomenon that could hit UK equities,” said Joachim Klement, head of strategy, economics and ESG at Panmure Liberum. 

“The strong macro data this week should start to filter through,” he said. “Together with the overall okay tech results in the US, that should provide some support.”

The UK’s FTSE 250 Index continued to underperform the wider market after it slumped 1.5% Thursday amid the bond selloff. Meanwhile, data released Friday showed the UK’s manufacturing PMI fell to 49.9 from 51.5 in September.

Gains have ebbed in recent weeks in Europe amid geopolitical risks in the Middle East. But investors are also bracing for a potential victory for Donald Trump, which last time around drove the sharpest underperformance in regional equities relative to US peers during any of the last eight American administrations.  

Results have been average but earnings beats were rewarded more than misses were punished due to particularly downbeat expectations, according to Citigroup Inc. strategists. This bearish set up could provide incremental improvements in sentiment from here, they added.

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