US jobs rise no boost to EU stocks

EUROPE’S longest stock-market rally since the bull market peak in 2000 has sputtered during the past month, and an unexpected rise in US employment may not be enough to revive the advance.

Morgan Stanley told clients last week to pare European equity holdings and to sell shares such as ASML Holding NV.

Merrill Lynch & Co predicted the region’s stocks will “grind lower” and suggested that investors avoid computer-related companies. Deutsche Bank AG advised investors to steer away from economically sensitive stocks.

Investors such as Felix Lanters said a surge in the euro’s value against the dollar, a two-week jump in the price of crude oil and recent stagnation in some of Europe’s largest economies suggest stocks may soon falter as they did last month.

“We are cautious about the strength of the recovery,’ said Lanters, who oversees about $7 billion in European stocks as head of equities at ABN Amro Holding NV in Amsterdam. “A weak dollar hurts European profitability directly and weakens exports, which usually are the major trigger for growth in Europe.”

European benchmarks, including the Dow Jones Stoxx 50 and Euro Stoxx 50, ended September with an eight-day losing streak.

On Friday, the indexes leaped more than 2.5% after a US government report showed the world’s largest economy added jobs in September for the first time in eight months. While the gains were the biggest since April, they weren’t enough to lift the benchmarks back to mid-September levels.

“The jobs data is encouraging,’ said Alex Scott, analyst at 7 Investment Management in London. “We need to see more evidence of growth, if recent gains are going to be sustained.”

The Stoxx 50, Euro Stoxx 50 and Stoxx 600 are up more than 30% since falling in March to the lowest in more than six years.