Europe stocks drop on French downgrade, U.S. data

LONDON (MarketWatch) — European stocks fell sharply on Friday after solid U.S. jobs data stoked tapering fears, while stocks in France slumped after Standard & Poor's lowered the country's credit rating to AA from AA+.

The Stoxx Europe 600 index (XX:SXXP)  dropped 0.8% to 321.89, putting it on track for a 0.2% weekly loss.

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France's CAC 40 index (FR:PX1)  dropped 1.1% to 4,236.21, after the country lost its AA+ rating. Standard & Poor's raised concerns about the country's growth prospects, saying the government's reforms to taxation, as well as to labor and other markets, won't substantially raise the country's medium-term outlook. Adding to pressure on the French index, data showed the country's industrial production dropped 0.5% in September, missing expectations of a small rise.

Banks slid in Paris, with shares of Société Générale SA (FR:GLE)  down 3.2%, BNP Paribas SA (FR:BNP)  off 1.6%, and Credit Agricole SA (FR:ACA)  1% lower.

Shares of oil giant Total SA (FR:FP)   (TOT)  dropped 1.3%.

Associated Press Shares slide in Paris after S&P cuts France's credit rating.

Stock markets in Europe remained lower after data from the U.S. showed 204,000 new jobs were added to the economy in October, well above expectations. The unemployment rate rose to 7.3% from 7.2%.

Strong U.S. data strengthen the case for the Federal Reserve to scale back its $85-billion-a-month in bond buys. On Thursday, figures showing the U.S. economy grew by a better-than-expected 2.8% in the third quarter spooked investors and left markets in both Europe and the U.S. in the red.

ECONOMY AND POLITICS | @MKTWEconomics

U.S. economy adds 204,000 jobs
The U.S. economy added 204,000 jobs in October –— double Wall Street's forecast — despite a government shutdown that was expected to put a damper on hiring.
• 'Dectaper' back on table: payrolls reactions
• Temporary layoffs spike 448,000
• Job seekers pad resumes with credentials
/conga/story/misc/dc.html 286425

On the data front in Europe, Germany's trade surplus beat forecasts in September as exports rose for a second straight month. Germany's DAX 30 index (DX:DAX)  lost 0.5% to 9,036.52, retreating from an all-time closing high reached on Thursday.

Car stocks fell after Nomura cut the European auto and auto-parts sector to bearish from neutral.

"Unlike many investors, we do not see or forecast a sharp rebound in European car sales anytime soon," the analysts said. "With declining populations, wage deflation, rising unemployment, and continuing government deficits, we see no reason why European car demand should not be compared with Japan's 20-year declining car market as opposed to the V-shaped recovery in the U.S.," they added.

Shares of Daimler AG (DE:DAI)  dropped 1.8%, BMW AG (DE:BMW)  fell 0.5%, and Volkswagen AG (DE:VOW3)  gave up 0.8%.

Rheinmetall AG (DE:RHM)  slid 6.6% after the German weapons and car-parts maker reported a sharp decline in third-quarter profit amid restructuring expenses.

The U.K.'s FTSE 100 index (UK:UKX)  dropped 0.4% to 6,672.08.

Shares of International Consolidated Airlines Group SA (UK:IAG)  jumped 6% in London after the British Airways parent said profit more than doubled in the third quarter.

Rolls-Royce Holdings PLC (UK:RR)  climbed 2.8% after the aerospace and defense firm said its overall estimate for "good growth" in full-year underlying profit is unchanged from its previous forecast in July.