European shares end at seven-month high, best week since March

© Reuters. FILE PHOTO: The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, January 4, 2023. REUTERS/Staff

By Bansari Mayur Kamdar and Shreyashi Sanyal

(Reuters) -European shares closed at seven-month highs on Friday, boosted by miners and oil stocks, while data pointing to a moderation in U.S. jobs growth helped calm nerves over the Federal Reserve's rate-hike trajectory.

The continent-wide STOXX 600 index closed 1.2% higher, its highest level since May. For the week, it clocked gains of 4.6%, best performance in more than nine months.

The European basic resources sector jumped 2.5%, leading the sectoral advance as China-exposed miners rallied amid higher copper prices. Energy stocks gained 1.8%, boosted by rising oil prices. [O/R] [MET/L]

European shares initially struggled for direction in the early hours but gained momentum after data from the U.S. showed nonfarm payrolls rose by 223,000 jobs in December, less than the previous month data, while a 0.3% rise in average earnings was smaller than expected and also lower than the previous month.

"Today's payrolls report was nirvana for the bulls," said David Russell, vice president of market intelligence at TradeStation Group.

"The Fed's latest worry has been the wage-price spiral, but this report shows just the opposite... We could be looking right now at a soft landing."

Economic data in Europe also boosted sentiment, with retail sales in Germany rose in November, adding to a slew of positive numbers this week that have indicated a milder-than-expected recession and an easing of price pressures in some countries.

Separately, euro zone economic sentiment improved in December for the first time since the start of the war in Ukraine, with more optimism across all sectors of the economy and a sharp drop in inflation expectations.

"The fall in inflation and improvement in economic sentiment in December suggest that the euro zone's case of stagflation is not as acute as feared a few months ago," said Andrew Kenningham, chief Europe economist at Capital Economics.

Rate-sensitive technology stocks, which were lower earlier in the day, ended 1.8% higher amid a hefty falls in major euro zone bond yields. [GVD/EUR]

Healthcare stocks rose 0.8%, with Roche Holding AG (OTC:RHHVF) jumping 0.9% after the Swiss pharmaceutical company said the U.S. Food and Drug Administration had granted priority review to its bispecific antibody Glofitamab.

Chrysler parent Stellantis NV fell 0.7% after Chief Executive Officer Carlos Tavares warned of more auto plant closures.

Shell (LON:RDSa) rose 1.7% after the oil major said earnings from its natural gas trading operations were likely to have risen significantly in the fourth quarter of last year, despite a sharp output drop due to plant outages.