LONDON (Reuters) - European shares fell by midday, led lower by banking stocks before key U.S. nonfarm payrolls data seen as key to stock investors’ hopes of an imminent Federal Reserve rate cut.
At 11:45 a.m., the FTSEurofirst 300 .FTEU3 index of top European shares was down 0.3 percent at 1,523.40 points, off its day's low of 1,519.66.
Bank stocks were the top negative weight on the index, led by Societe Generale (SOGN.PA), which slipped 4.2 percent on market talk that it was preparing investors for a profit warning. SocGen declined immediate comment.
Analysts said that the macroeconomic picture would dominate as the session wore on.
“Clearly non-farm payrolls will be watched very closely, and the market will remain shaky,” AXA Investment Managers strategist Franz Wenzel said.
“We’re expecting numbers possibly below 100,000, and markets to react negatively to that in the first instance, but recovering once the dust has settled and it confirms that there is reason to lower rates.”
Consensus estimates peg the number of new jobs added in the non-agricultural sector at 110,000 in August.
European shares have eked out a 2.5 percent gain so far this year but have fallen 7 percent from a 6-1/2 year peak hit in mid-July due to worries about the extent that a crisis in the U.S. market for subprime mortgages has spread to the wider economy.
Overnight interbank lending rates have risen sharply over the past couple of months as banks become hesitant to lend to each other, fearing subprime exposure. They eased slightly over the course of the week, helped by cash injections from central banks.
Spreads on corporate hybrid bonds, instruments that combine features of debt and equity, widened on Friday.
Other major losers among banks included Italy’s UniCredit (CRDI.MI), which fell 3.4 percent after Capitalia CPTA.MI, a rival it has agreed to buy, reported a fall in first-half profit. Capitalia stock fell 3.7 percent.
Oil and mining stocks were the top performing sectors, with miners continuing to be supported by persistent bid talk around Rio Tinto (RIO.L).
Speculation that a combination of BHP Billiton BLT.L and Brazilian miner CVRD VALE5.SA is planning an approach to Rio has lifted mining stocks in the past couple of sessions, and contributed to a 0.8-percent rise in the DJStoxx European Basic Resources index on Friday.
Rio gained 0.7 percent, Lonmin LMI.L rose 2.2 percent and BHP Billiton gained 1.6 percent.
Brent crude prices hovering just below $75 helped index heavyweight oil shares rise.
Wenzel said markets would continue to remain volatile for the rest of the year.
“Shares should go up over the next six months but it’s going to be a rollercoaster ride. Real estate, subprime, employment data is going to be studied closely, and there’s going to be a tussle between attractive equities valuations and a shaky macro environment,” he said.