Europe’s STOXX 600 hits record high, heads for best week since May

Europe's STOXX 600 briefly touched a record high on Friday and was on track for its largest weekly gain since mid-May, as softer U.S. employment data eased fears of near-term Federal Reserve rate hikes and a broadening rally lifted cyclical sectors alongside technology shares.

Record Highs Across Europe

The pan-European benchmark was last up 0.2% at 649.86 points, according to Reuters, while Germany's DAX also notched an all-time high, gaining 0.5%. Defence stocks led the week's advances, followed by cyclicals including industrials, banks, and financial services, as the rally — previously concentrated in technology names — spread more widely amid easing Middle East tensions.money.usnews+1

Chip stocks provided a lift on Friday, with Soitec, Aixtron, and BE Semiconductor all posting gains above 3.5%. Technology shares had logged their biggest quarterly gain since 2001 earlier in the week, driven by the global AI-fueled rally.investing+1

Weak U.S. Jobs Data Reshapes Rate Expectations

The catalyst for the week's constructive tone was a Labor Department report showing U.S. nonfarm payrolls rose by just 57,000 in June, well below the 110,000 economists had forecast. The unemployment rate held at 4.2%, while prior months' gains were revised lower.cnbc+2

Markets rapidly recalibrated, with CME FedWatch data showing traders now pricing a 52% probability of a September rate hike, down from 64% before the report. Fed Chairman Kevin Warsh had noted earlier in the week that inflation expectations had declined in recent weeks, even as the central bank remained committed to its 2% target.businesstoday+2

Dollar Weakens, Gold Rallies

The dollar index slipped to around 100.70 on Friday, down roughly 0.6% for the week — its steepest weekly decline since early April. The euro hovered near a two-week high, while the Japanese yen steadied after rebounding nearly 1% the prior session.reuters+1

Gold extended gains after surging more than 2% on Thursday, supported by the weaker dollar and diminished rate-hike expectations. "The lower-than-expected jobs number portends to less likelihood of potential rate hikes later this year," said David Meger, director of metals trading at High Ridge Futures. Trading volumes were expected to thin on Friday ahead of the U.S. July 4th holiday.cnbc+1