European Stocks Drop as US Job Market Cools; Defense Shares Fall

(Bloomberg) — European stocks fell as data showed a continued cooling in the US labor market. Defense stocks dropped after US negotiators offered Kyiv significant security guarantees.

The Stoxx Europe 600 Index was down 0.5% at the close. Germany’s Rheinmetall AG, the defense sector’s bellwether, dropped 4.5%, while Italy’s Leonardo SpA fell 3.9%.

US figures showed nonfarm payrolls increased 64,000 in November after declining 105,000 in October. The unemployment rate was 4.6% last month, up from 4.4% in September and the highest since 2021.

Karen Georges, a fund manager at Ecofi Investissements in Paris, said the data still set the stage for a smooth end to the year for equities. “A moderate deterioration of the labor market is just what the market wanted,” she said.

Financial services and consumer products stocks were the biggest outperformers. Meanwhile, energy declined the most as West Texas Intermediate crude oil fell on signs of surplus and Ukraine peace talks.

European equities are tracking a sixth straight month of gains as investors bet the Federal Reserve will continue to cut interest rates. Europe has benefited this year as investors sought alternatives at a time of increasing concerns around rising artificial intelligence valuations.

“The equity rotation out of tech into other sectors is set to continue regardless of today’s labor market data, given that fundamental questions around profitability and AI adoption are driving it,” said Wolf von Rotberg, equity strategist at Bank J Safra Sarasin.

Among individual stocks, Switzerland’s UBS Group AG gained 3.8% after Bank of America Corp. upgraded the lender to buy from neutral, saying that the bank is a “highly attractive proposition,” with scope for more lenient capital requirements.

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–With assistance from Michael Msika and Sagarika Jaisinghani.

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