European Markets Fall

By SIMON KENNEDY

The Wall Street Journal

LONDON—European stock markets ended sharply lower in a volatile session Friday, extending a global selloff, though stronger-than-expected U.S. jobs data helped shares trade above their session lows.

The Stoxx Europe 600 index dropped for the sixth straight session and ended down 1.8% at 238.88, its lowest close since July 2010. The index dropped 10% for the week amid growing worries over sovereign debt as well as fears that the U.S. could slip back into recession.

Stocks were helped off their lows by a report showing the U.S. economy added 117,000 jobs in July, beating forecasts, with the unemployment rate edging down to 9.1%.

Issei Kato/Reuters

U.S. stock markets initially moved higher but quickly lost momentum. In early afternoon trade in New York, the Dow Jones Industrial Average was down about 72 points at 11312. There was selling in U.S. Treasurys, with the benchmark 10-year note down 24/32 in price, pushing the yield up to 2.482%.

Against this backdrop, some European financial stocks that have been hammered in recent sessions managed to post gains Friday, along with cyclical stocks that have been hit by recession worries.

Top gainers included French bank Natixis, whose shares jumped 11% after the company reported a modest 3% drop in second-quarter net profit late Thursday.

WSJ's Charles Forelle joins the News Hub to discuss the dour mood in Europe as major indexes plunge. Italy and Spain reveal a slight silver lining with a relief rebound. (Photo: Associated Press)

Telecom equipment provider Alcatel-Lucent rose 3.5%. The stock had fallen by more than a third over the previous seven sessions.

Still, the French CAC 40 fell 1.3% to 3278.56, including a 3% drop for oil giant Total as crude-oil prices added to Thursday's heavy losses.

Spanish and Italian banks also moved higher. UniCredit rose 2.2%.

The Italian FTSE MIB index fell 0.6% to 16028.8, while the Spanish IBEX 35 index was virtually unchanged. For the week, it sank 13%.

"When the most-damaged indexes and the most-damaged financials start to rebound, it may be a sign for markets to say we've fallen enough," said Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets.

U.K. banks were among the worst performers in Europe as London's FTSE 100 index dropped 2.7% to 5246.99.

Royal Bank of Scotland Group dropped 6.9%. The stock had tumbled more than 20% in early trading after second-quarter financial results showed the bank swinging to a loss and taking hefty impairment charges on its Greek debt holdings.

In Frankfurt, the German DAX 30 index slid 2.8% to 6236.16. Decliners included a 4.5% drop for Allianz, after the insurer reported an 8.2% drop in net profit for the second quarter, driven by a write-down on its holdings of Greek government debt.

Write to Simon Kennedy at simon.kennedy@dowjones.com