By Blaise Robinson
PARIS, June 6 (Reuters) - European stocks dropped 2 percent
on Friday, ending at a seven-week closing low after data showed
a jump in the U.S. jobless rate that sent the dollar down and
led to a surge in the oil price.
Banks were among the biggest losers, with UBS <UBSN.VX> down
6.4 percent and Royal Bank of Scotland <RBS.L> down 5.2 percent.
The FTSEurofirst 300 <> index of top European shares
ended 2 percent lower at 1,283.99 points, a closing level not
seen since April 15.
The index, which lost 3.7 percent on the week, is down 15
percent on the year, hit by fears of a U.S. recession as well as
concerns over the impact of a credit crisis that has forced
banks to unveil massive asset rightdowns and emergency capital
injections.
"The U.S. is already in a recession in the construction,
real estate and financial sectors. It has not spilled into other
sectors so far because exports are strong and consumer spending
shows some resilience," said Jean-Francois Virolle, chief
strategist at Global Equities, in Paris.
"But between the bears and the bulls, a lot of people don't
know where to go because there is a total lack of visibility."
Shares in airlines -- sensitive to high oil prices -- were
among the worst hit, with Air France-KLM <AIRF.PA> down 6
percent, while exporters such as automakers got hammered as the
euro rose against the greenback. BMW <BMWG.DE> shed 4.4 percent
and Daimler <DAIGn.DE> fell 4.7 percent.
"This confirms that oil prices are closely following the
dollar, and stocks are suffering from the spike, particularly
airlines. Just look at how their shares have been dumped,"
Virolle said.
"Automakers are suffering too, hit from all sides: the
rising euro, rising steel prices, rising oil prices...while the
outlook for consumer spending is gloomy."
Data showed on Friday the U.S. unemployment rate jumped to
5.5 percent last month from 5 percent, and U.S. employers shed
jobs for a fifth consecutive month in May, cutting some 49,000
jobs, up from a revised 28,000 that were lost in April.
"All in all, we usually look at the big non-farm payroll
figure but this time it seems to be the actual unemployment rate
which has risen quite dramatically," said Angus Campbell, head
of sales at Capital Spreads. "It's not looking great when the
last few weeks we've had glimmers of hope for the market place."
Oil soared by more than $6 a barrel to over $134, bringing
gains in the last two days to $12 as the dollar weakened further
on the rise in the U.S. jobless rate.
A Morgan Stanley report predicting oil could reach a record
high of $150 by July 4, also sent crude prices roaring upwards.
But the fresh spike in oil failed to boost energy shares,
which retreated along with the broad market. Total <TOTF.PA>
fell 1 percent, BP <BP.L> shed 0.4 percent and Repsol YPF
<REP.MC> dipped 0.1 percent.
Among the few stocks on the upside, Xstrata <XTA.L> gained
3.7 percent, BHP Billiton <BLT.L> rose 1.3 percent and BG Group
<BG.L> added 2.4 percent.
Around Europe, Germany's DAX index <> lost 2 percent,
UK's FTSE 100 index <> dropped 1.5 percent and France's CAC
40 <> fell 2.3 percent.
(Additional reporting by Michael Taylor in London; editing
by Sue Thomas)
