Bruised European shares hit over 3-month low ahead of US jobs report

European shares edged lower on Friday, following sharp losses in the previous session after U.S. data showed a still strong labour market, while investors awaited a key U.S. jobs report due later in the day for more clues on the interest rate outlook.

The pan-European STOXX 600 index fell 0.3%, led by a 1.5% decline in utilities shares, and was set for its worst week since mid-March. Miners rose 0.9%.

UK’s FTSE 100 index also fell 0.5%.

European equities took a hit on Thursday after private payrolls in the United States surged far more than expected in June, suggesting the labour market remained solid despite growing risks of a recession.

The data also prompted a surge in the U.S. two-year treasury yield to a 16-year high, while in the UK, the yield on 10-year gilts rose to its highest since 2008.

Investors will keep a close watch on the American non-farm payrolls report, due at 8:30 a.m. ET (1230 GMT). The report is expected to show a drop in the number of jobs created in the United States in June compared to a month earlier.

“If the payroll data does confirm that the labour market is resilient, we will probably see more weakness in bonds and equities,” said Capital Economics markets economist Hubert de Barochez, adding “that’s why investors are very cautious.”

Meanwhile, German industrial production fell 0.2% in May compared with the previous month. Analysts polled by Reuters had predicted that output would stagnate in May.

Among the top gainers on the STOXX index, Clariant jumped 5.3%. The company’s preliminary second-quarter results showed weaker sales and outlook for current financial year.

Coca Cola HBC AG (LON:CCH) added 3.1% after the bottler raised its 2023 profit expectation.

Food delivery firm Just Eat Takeaway (LON:JETJ) fell 8.1%, after Exane cut the stock to “underperform” from “neutral”.

Top loser on the index, OSB Group dropped over 24% to hit its lowest since October 2022 after British lender flagged an up to 180 million pound ($229.4 million) hit as customers refinance their mortgages earlier than forecast.

Markets will closely monitor the commentary from European Central Bank (ECB) policymakers including President Christine Lagarde, after markets close, to assess ECB’s monetary tightening path.