European shares fall sharply ahead of US payrolls report

European shares retreated on Friday after strong gains in the previous session, with investors focusing on a US jobs report for hints about the timing of an expected interest rate rise in the United States.

Economists expect the US economy to have generated 220,000 new non-farm jobs last month, continuing the robust employment creation of the past five years. The jobs report is due at 12.30 GMT.

“Markets are worried about a too strong US job report which could spark the Fed into hiking rates in September,” said Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets.

“The Fed uncertainty, together with the worries about China, will keep markets volatile over the next couple of weeks and potentially until the end of October.”

Energy shares were among the top sectoral decliners, with the STOXX Europe 600 Oil and Gas index falling 1.4 per cent, tracking a sharp decline in crude oil prices.

The pan-European FTSEurofirst 300 index was down 1.3 per cent at 1,410.52 points by 0744 GMT, after surging 2.4 per cent in the previous day when the European Central Bank delivered a dovish message from its first meeting after weeks of market turmoil.

Germany’s benchmark DAX share index fell 1.4 per cent, also under pressure after data showed industrial orders fell more than expected in July on lower foreign demand.

Britain's second-largest clothing retailer, Next, and electrical goods and mobile phone retailer, Dixons Carphone , fell 3.4 per cent and 2.9 per cent respectively after Exane BNP Paribas cut its target price for both the stocks.

Shares in Neopost, the French mail and shipping group, surged 11 per cent after the company confirmed its 2015 outlook on the back of higher sales in the second quarter.

Reuters