European shares traded lower on Friday, setting a regional index on course for its steepest weekly fall so far this year, after Greece delayed a debt payment and as caution prevailed before US employment data.
The pan-European FTSEurofirst 300 index was down 1 percent at 1,543.66 points at 0759 GMT. Greece’s Athex General Composite index was down 3.1 percent.
Greece delayed the payment to the International Monetary Fund, due on Friday, as Prime Minister Alexis Tsipras demanded changes to tough terms from international creditors for aid to stave off default.
The FTSEurofirst is down 4.6 percent since the start of the week, setting it on course for its biggest weekly fall since December against a volatile market backdrop in which yields on German Bunds rose to eight-month highs on Thursday and the euro has yo-yoed against the dollar.
The movement in bond yields reflects rising inflation expectations in the euro zone, compounded by the European Central Bank’s stated unwillingness to act to counter market volatility.
“I would stay short (stocks) until there is more clarity on Greece,” Mike Reuter, a trader at Tradition, said.
He said the current, unusual correlation between German government bonds, traditionally a safe asset, and shares was unlikely to last, with the former likely to do well if Greece defaulted and the latter to rebound if it didn’t.
In this context, investors were awaiting US jobs data, due at 1230 GMT and expected to underpin expectations of a rate hike as early as September.
This would likely further lift bond yields across the world but might benefit euro zone shares by pushing down the euro.
Economists polled by Reuters expect May’s non-farm payrolls report to show US employers added 225,000 jobs.
“It’s going to have to be higher than 300,000 to reawaken thoughts of a June (US rate) hike,” Andy Ash, head of sales at ADM Investor Services, said.
Switzerland’s Syngenta was the biggest faller on the FTSEurofirst, down 2.5 percent on worries about regulatory hurdles for its deal with US agrochemicals firm Monsanto. [Reuters]