September 2, 2016 / 1:27 PM / 2 years ago

European shares lifted by firmer utility, mining stocks

(ADVISORY- Reuters plans to replace intra-day European and UK stock market reports with a Live Markets blog on Eikon - see cpurl://apps.cp./cms/?pageId=livemarkets for site in development. See the bottom of the report)

* Stock markets rise after weaker-than-forecast U.S jobs data

* STOXX 600 index up around 1 percent

* Utility and mining stocks outperform

* But SBM Offshore plunges

By Sudip Kar-Gupta

LONDON, Sept 2 (Reuters) - European shares rose on Friday with utility and mining stocks outperforming, as weaker-than-expected U.S jobs data led investors to pare back bets on an imminent U.S. interest rate hike.

The pan-European STOXX 600 index index was up 1.1 percent in late session trading, with the region’s stock markets moving higher after data on Friday showed that U.S. employment growth slowed more than expected in August.

That in turn meant traders were now pricing in about even odds for a December rate hike in the United States, with little chance of a rise before then. Before the report, traders saw better than even odds of a December rate increase.

The weaker-than-forecast jobs data also chimed in with tepid U.S. ISM factory growth figures published on Thursday, again reinforcing the expectation that the U.S. Federal Reserve would raise rates later rather than sooner.

Lower interest rates are typically good for stocks, as it means stocks offer comparatively better returns compared to bonds and cash, while it also means that companies listed on stock markets can have lower borrowing costs.

“So soon after a weak ISM reading, today’s non-farm figures may pour cold water on the prospect of a rate rise later this month, despite the Fed’s upbeat assessment of the economy in August,” said Nancy Curtin, Chief Investment Officer of Close Brothers Asset Management.

The STOXX Europe 600 Utilities outperformed with a 1.8 percent rise, with France’s Veolia climbing 3.8 percent as investors welcomed the company’s issuance of a 1 billion Renminbi ‘Panda’ bond.

Mining stocks also outperformed, with the sector boosted by a drop in the dollar after the relatively weak U.S. jobs data, since a weaker dollar makes commodities priced in the U.S. currency more affordable for global investors.

Among stocks to lose ground was SBM Offshore.

SBM plunged 11.5 percent after prosecutors in Brazil rejected a deal allowing the Dutch energy services company to avoid prosecution for corruption related to contracts with oil group Petrobras.

Additional reporting by Danilo Masoni in Milan; editing by Mark Heinrich

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