January 6, 2017 / 2:45 PM / in 2 years

European shares off lows after U.S. jobs data

* STOXX Europe 600 index steady

* FTSE set for 5th week of gains

* U.S. non-farm payrolls disappoint, but earnings strong

* Nets set for biggest fall following downgrade (ADVISORY- Follow European and UK stock markets in real time on the Reuters Live Markets blog on Eikon - see cpurl://apps.cp./cms/?pageId=livemarkets)

By Alistair Smout and Atul Prakash

LONDON, Jan 6 (Reuters) - European stocks rallied from lows on Friday after a stronger than expected increase in earnings in a flagship U.S. jobs report made up for a weaker-than-forecast payrolls figure.

The benchmark STOXX 600 index stayed on track for its best weekly performance since the middle of December, as it turned higher following the non-farm payrolls report.

U.S. employment increased less than expected in December but a rebound in wages pointed to sustained labor market momentum that sets up the economy for stronger growth and further interest rate increases from the Federal Reserve this year.

The STOXX 600, which had been down 0.4 percent ahead of the data, was last flat.

Britain’s commodity-heavy FTSE 100 index was also flat after hitting a record high the previous day, and was on track for its fifth straight week of gains.

The STOXX 600 remained 0.8 percent down from a one-year high set earlier this week, but was still up 1.1 percent this week.

The index is up around 12 percent from November’s lows, as investors have bet that the election of Republican Donald Trump as U.S. president might result in fiscal stimulus, buoying growth and inflation globally.

“The big upward revision to November and a 2.9 percent increase in average hourly wages are going to be enough to let markets keep their faith in the Trump reflation trade and the U.S. Federal Reserve plans further interest rate increases,” said Russ Mould, investment director at AJ Bell.

Precious metals miners Fresnillo and Randgold Resources fell more than 2.3 percent after gold slipped from one-month highs, hindered by dollar strength.

UBS analyst Daniel Major stayed positive on the sector’s outlook. “Despite the uncertain gold price backdrop, looking into 2017 the European gold miners are in good shape from a cost and balance sheet perspective,” he said.

Large-cap gold miners including Randgold and Fresnillo also faced less pressure than some of their peers to lift capex to replace depleting reserves and offset declining production over the next 2 to 3 years, he said.

Danish payments firm Nets was the top faller, down 3.4 percent and heading for its biggest decline since its IPO in September after a downgrade to “sell” from “hold” by Danske Bank.

Shares in Fiat Chrysler Automobiles rose 5.1 percent, the biggest riser in the STOXX 600 index, after Goldman Sachs added the stock to its “Conviction List” and raised its target price to 16.5 euros from 9.9 euros.

“In our view the market significantly underappreciates FCA’s ability to improve its NAFTA (North America) price-mix via shifting production away from mass-market cars and into more profitable vehicles,” Goldman Sachs analysts said in a note. (Editing by Mark Heinrich)

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