European shares surge after weak US jobs data eases rate hike fears

European equities rallied sharply on Thursday after a weaker-than-expected US jobs report tempered expectations for Federal Reserve interest rate hikes, helping markets shake off earlier pressure from a global selloff in artificial intelligence stocks.

The pan-European STOXX 600 closed 1.4% higher, while London's FTSE 100 gained 1.7% and France's CAC 40 rose 1.65%, according to CNBC. The gains reversed losses from Wednesday, when the index had fallen 0.4%.cnbc+1

Weak Payrolls Shift Rate Expectations

The US economy added just 57,000 jobs in June, well below forecasts ranging from 100,000 to 115,000, according to the Bureau of Labor Statistics. The prior month's figure was also revised down to 129,000 from an initially reported 172,000. While the unemployment rate dipped to 4.2%, the decline was driven by roughly 720,000 people leaving the labor force, pushing the participation rate to 61.5% — its lowest since March 2021.morningstar+2

The soft data prompted traders to cut the odds of a July rate hike below 20% and price September hike odds at about 60%, according to Reuters. The report reinforced a picture of a labor market in "standstill," as Indeed's Hiring Lab described it.reuters+1

AI Selloff Limits Early Gains

Earlier in the session, European shares had been weighed down by a global retreat in AI-linked stocks following Meta's ↘ 4.45% announcement of plans to sell access to AI computing power, which raised overcapacity concerns. The STOXX 600 technology index fell 2%, with Soitec dropping as much as 4.5% and Aixtron falling 5.1%.kfgo+1

However, Europe's relatively smaller exposure to technology stocks limited the drag on the broader index.money.usnews

Sodexo Leads Individual Movers

Sodexo ↗ 5.52% surged as much as 9% after the French food services group raised its full-year organic revenue growth forecast to between 1.2% and 1.5%, up from a previous range of 0.5% to 1%, citing stronger-than-expected third-quarter performance. Germany's Bayer gained 5.5% after announcing it was consolidating its US Roundup business into a new unit, while SKF AB SKF rose 4.2% on a joint venture deal focused on humanoid robot components.reuters+1