European shares end week in red

European shares fell sharply on Friday to end the week in the red after a surprising slide in US job creation reignited fears over the pace of growth in the world's largest economy. US non-farm payrolls showed just 18,000 jobs added in June compared with a forecast for 90,000, adding to other data that suggesting the recovery there will be sluggish and uneven.
The surprise underpinned a spike in volatility and gave market bears, already unsettled by the eurozone sovereign debt crisis, another reason to take profits after what had been a fairly positive week until that point. "It's certainly very disappointing and does raise questions whether this was a temporary slowdown or anything else. It will up the emphasis on the second-quarter reporting season," Keith Bowman, equity analyst at Hargreaves Lansdown, said.
The FTSEurofirst 300 index of European blue chips ended down 0.8 percent at 1,114.44 points, for a weekly loss of 0.4 percent, after being up as high as 0.5 percent before the jobs announcement. The index is down 0.7 percent so far this year. Volatility, measured by the Euro STOXX 50 volatilty index, ended the day up 8.8 percent at 22.41.
Banks led fallers across the region, battered by eurozone sovereign debt and capital adequacy concerns, with the STOXX Europe 600 ending the day down 2.3 percent. The Thomson Reuters Peripheral Euro Zone Banks index fell 5.3 percent. Italian lenders were among the hardest hit with markets spooked by fresh political infighting in Rome and concern that Italian banks could need to raise fresh funds after a second European Union bank stress test, the results of which are due next Friday.
Investors bailed out of the blue chip FTSE MIB in droves on Friday, sending it briefly to a 1-year low. Leading the broad-based decline was lender UniCredit, which ended down 7.9 percent on concerns it may need to raise fresh cash to prop up its balance sheet, even though Bank of Italy chief Mario Draghi said he was sure all Italian lenders would pass the test.
Draghi also gave support to recently passed austerity cuts and said the budget could be balanced by 2014. The bond market was equally spooked, however, and yields rose. The next debt-market test for Italy will come on Thursday. Challenging UniCredit for the title of biggest regional faller, albeit in sharply higher volume, was media company BSkyB , whose traded volumes were more than 12 times their 90-day daily average.
The UK-listed firm fell 7.6 percent in a 1.1 percent weaker FTSE 100 after a phone-hacking scandal forced the closure of one its best-selling newspapers and threatened its $14 billion buyout by News Corp. With Alcoa set to kick off the second-quarter US earnings season on Monday, European blue chips will also start to report in earnest, and analysts at Goldman Sachs said they expected results to be in line or slightly above expectations.
"Since the beginning of the year earnings expectations have been revised down. The downgrades match what we would expect given the weaker macro picture and we therefore expect European results to come in line or slightly above these reduced expectations," they said in a note. Of the 279 STOXX Europe 600 firms due to report quarterly earnings, 1 percent have done so. Of the rest, Thomson Reuters StarMine data showed each was expected to post an average earnings miss of 1.2 percent.