European Markets Pulled Back Following Yesterday's Rally

(RTTNews) - The majority of the European markets finished in the red on Friday, following the strong rally of the previous session. The unexpected decline in Germany factory orders weighed on investor sentiment. Also, investors were unsure what the better than expected U.S. jobs report may mean in terms of potential stimulus tapering by the Federal Reserve.

European Central Bank President Mario Draghi said on Thursday that euro area interest rates are likely to remain low for an 'extended period' of time, a statement that was construed as a forward guidance about the policy path to markets that were rattled by the Portugal political crisis and the U.S. Federal Reserve's tapering announcement.

In an unusual step, Bank of England policymakers issued a statement with a no-change decision on Thursday. The bank said the implied rise in the expected future path of Bank Rate was not warranted by the recent developments in the domestic economy.

Germany's Finance Minister Wolfgang Schaeuble on Thursday brushed aside concerns that the political stalemate in Portugal will spark another round of crisis in Eurozone, reports said.

"The euro is seen as so stable by financial markets that even political situations and policies of individual countries don't mean a crisis for the euro as a whole," he said at a press conference following a loan deal between Germany and Spain.

"I don't think this will lead to a new euro crisis," the minister said. Schaeuble, nonetheless, said he regretted the resignation of Portuguese Finance Minister Vitor Gaspar.

Greek Finance Minister Yannis Stournaras said Thursday that the talks with the country's international lenders on the next bailout payment can be concluded by July 8, ahead of a meeting of Eurozone finance ministers.

"There was progress on all issues," and a political agreement is most likely to be reached by Monday, Stournaras was quoted as saying after a meeting between him and Prime Minister Antonis Samaras.

The International Monetary Fund has warned that possible policy slippages, including at the European level, may pose downside risk to Italy's economic outlook and could undermine market confidence in the sovereign.

Any backtracking on the policy could also intensify funding pressures on the banks and tighten credit, the Washington-based lender said in a regular review report on Thursday.

The Euro Stoxx 50 index of eurozone bluechip stocks declined by 1.75 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, lost 1.20 percent.

The DAX of Germany dropped by 2.36 percent and the CAC 40 of France fell by 1.46 percent. The FTSE 100 of the U.K. decreased by 0.72 percent and the SMI of Switzerland lost 0.63 percent.

In Frankfurt, Air Berlin finished higher by 1.27 percent. The airline reported traffic data for June.

Sky Deutschland climbed by 4.24 percent. The stock was upgraded to ''Conviction Buy'' from ''Buy'' at Goldman Sachs.

In Paris, Alstom declined by 2.50 percent. Deutsche Bank downgraded Alstom to ''Hold'' from ''Buy.''

In London, Whitbread dropped by 2.79 percent. UBS downgraded the stock to "Neutral" from "Buy."

Mining stocks turned in a weak performance Friday. Anglo American declined by 3.64 percent and Anotfagasta lost 5.93 percent. BHP Billiton decreased by 3.64 percent and Fresnillo sank by 5.52 percent. Glencore Xstrata fell by 6.54 percent and Rio Tinto dropped by 4.41 percent.

German factory orders declined unexpectedly in May, largely due to subdued demand from the euro area, mirroring fragility in the nascent recovery in the largest Eurozone economy. The decline in turn potentially damped hopes of a recovery seen at the end of this year in the 17-nation bloc.

Factory orders slipped 1.3 percent from a month ago, when it declined by a revised 2.2 percent, a report from the Federal Ministry of Economics and Technology showed Friday. This was the second consecutive fall in orders. Although the decline was in contrast to the 1.2 percent growth expected by economists, the pace of decline slowed from April.

The French trade deficit increased significantly in May due to a notable decline in exports, data from customs office showed Friday. The trade gap widened to EUR 6.01 billion in May from EUR 4.48 billion in April. The shortfall was forecast to increase to EUR 4.6 billion.

Employment in the U.S. increased by more than anticipated in the month of June, according to a report released by the Labor Department on Friday. The report said non-farm payroll employment increased by 195,000 jobs in June, matching the revised job growth seen in May.

Economists had been expecting employment to increase by about 165,000 jobs compared to the addition of 175,000 jobs originally reported for the previous month.

Despite the stronger than expected job growth, the unemployment rate came in unchanged at 7.6 percent. The unemployment rate had been expected to edge down to 7.5 percent.