Europe close: Stocks rally as investors cheer softer-than-expected NFP

2nd Oct 2026 15:05

(Sharecast News) - European stocks rallied on Friday despite rising eurozone inflation and French government bond volatility as the latest US non-farm payrolls report raised expectations the Federal Reserve ​will keep ​rates on hold at its meeting ⁠this month.

The pan-regional Stoxx 600 index closed up 0.7% at 630.95, Germany's DAX rose 1.2% to 25,231.20 and France's CAC 40 increased 0.8% to 7,897.19.

Brent crude was weaker but back above $100 a barrel, down 0.9% at $101.95, while West Texas Intermediate was 2.1% lower at $90.91 following reports that European Union member states are discussing a French proposal to release additional diesel reserves after pressure from the Trump administration.

Investors were digesting data from the US Bureau of Labor Statistics which showed the economy added far fewer jobs than expected in September. Payrolls rose by 29,000, while the unemployment rate ticked up to 4.2% from 4.1%. Payrolls had been expected to increase by 84,000 last month, while the unemployment rate was forecast to be unchanged.

The data for August was revised down by 29,000 to show that 133,000 jobs were added, versus the 162,000 previously reported. Meanwhile, the change for July was revised down to show that 10,000 jobs were lost, versus a 21,000 gain previously reported.

The BLS said employment in construction, manufacturing and financial activities was little changed.

"Employment also showed little change over the month in other major industries, including mining, quarrying, and oil and gas extraction; wholesale trade; retail trade; transportation and warehousing; information; professional and business services; social assistance; leisure and hospitality; other services; and government," it said.

The labour force participation rate nudged up to 61.8% in September from 61.7% in August, while average hourly earnings rose just 0.1% on the previous month and 3% on the previous year.

Susannah Streeter, chief investment strategist at Wealth Club, said: "There's been a ripple of relief on financial markets as hopes rise that the Fed won't have to go so hard and fast in raising interest rates. Treasury and gilt yields have eased off, and equity markets are on a rising tide, as the rush of worry has started to recede.

"The figures suggest the jobs engine is losing a little steam, but isn't spluttering to a halt, so the snapshot has been greeted as a dose of better news and a sign that the Fed may be a tad more wary about hiking borrowing costs. Rather than a rapid succession of rate rises, chances are increasing for a more measured path ahead, closer to the prospect of two further increases."

Closer to home, flash data from Eurostat showed that eurozone inflation rose to 3.8% in September, from 3.2% in August 2026.

Energy prices were the biggest driver - up 18.8% year on year. Services inflation rose to 3.2%, up from 3.0% in August.

In equity markets, Julius Baer advanced as it announced a share buyback programme of up to CHF600m.

On the downside, IG Group shares plunged after the online trading platform slashed its full-year guidance, while Commerzbank edged lower after a downgrade to 'sector perform' from 'outperform' at RBC Capital Markets.