Europe close: Stocks finish lower despite sharp drop in US unemployment rate

Stocks were pushed into the red by US data showing a big drop in the country's unemployment rate alongside a big acceleration in the pace of wage gains which initially served to send government debt yields higher on both sides of the Atlantic.

At the close of trading, the benchmark Stoxx 600 was down by 1.56 points or 0.40% to 389.47, alongside a dip of 12.11 points in the German Dax to 12,955.94.

That followed an unexpected two tenth of a percentage point drop in the US unemployment rate to 4.2% (consensus: 4.4%), while average hourly earnings leapt by 0.5% on the month (consensus: 0.3%).

Some economists pointed to a sharp drop in leisure and hospitaly jobs Stateside as a reason for the strong print on wages, but fixed income markets reacted poorly nevertheless.

Initially that sent the yield on the benchmark 10-year German bund four basis points higher to 0.50%, although by the end of the session it was 0.46%.

In Spain, the top flight Ibex 35 slipped by 0.29% or 29.20 points to 10,185.50 - although that was well off its lows of the session - amid news that several large listed firms including Gas Natural, Abertis and Dogi were set to follow in the footsteps of CaixaBank and Banco Sabadell and redomicile outside of Catalonia.

Acting as a backdrop, on Thursday, and at the behest of Catalonia's Socialist party, Spain's Constitutional Court prohibited a plenary session of the Catalan parliament in which it was expected that regional officials might make a unilateral declaration of independence - although some reports indicated that the region's leaders would still try to forge ahead.

Nonetheless, on Friday afternoon one of Catalonia's ex-presidents, Artur Mas, said the region was "not ready for real independence", although in his view it had won its right to it.

In other economic news, new factory orders in Germany shot higher by 3.6% in August when compared with the month before, according to the Ministry of Finance, led by a 7.7% jump in orders from outside the euro area.

Still on the economic calendar for later in the day, credit rating agencies DBRS and Moody's were expected to release their latest assessments for Spain and Italy after the close of trading.

"We expect markets to look mainly at average hourly earnings and not so much non-farm payrolls. This is also what the Fed signalled at the latest meeting, as the statement explicitly said that the Fed will look through short-term weakness due to hurricanes," said analysts at Danske Bank.

On the corporate front, low cost airline easyJet guided towards full-year earnings before tax of between £405 to £410m, down from £495m one year earlier.