U.S. jobs data hoists European shares to 5-year highs

Last Updated: Fri, May 03, 2013 16:40 hrs

* FTSEurofirst 300 firms 1 percent

* Cyclical autos, miners lead after U.S. jobs data

* European stock 'fear gauge' sinks 6 percent

By Tricia Wright

LONDON, May 3 (Reuters) - European shares rose to a new five-year closing high on Friday as robust U.S. jobs data spurred on investors already heartened by the central bank stimulus that has supported equities over other assets.

Cyclical auto and mining stocks , so-called as they are geared to the economic cycle, were best supported, rising more than 3 percent after the data which showed U.S. April non-farm payrolls rose by 165,000, ahead of the forecast 145,000.

"Good job numbers in the U.S. which have been taken well... For now it is hard to see what can stop this market," said Lex van Dam, hedge fund manager at Hampstead Capital, which manages around $500 million in assets.

The FTSEurofirst 300 ended up 1 percent at 1,218.60, its highest close since June 2008, leading to a 1.9 percent gain over the course of a week in which the European Central Bank cut interest rates in a fresh attempt to stimulate the economy.

In a sign of improving investor appetite for equities, the Euro STOXX 50 Volatility Index sank 6 percent on Friday.

The healthcare and food & beverages sectors which are seen as defensive plays against economic uncertainty were the worst performers, trading up 0.1 percent and flat respectively.

Some analysts reckoned the highly unusual theme which has characterised market trends this year, whereby defensive stocks have outperformed cyclicals in a rising market, has run its course.

"I think we now have the potential policy expectations at least to prompt a degree of rotation to a more normalized pattern of... cyclical and financial leadership in a market which is heading north on liquidity stimulus," said Ian Richards, head of equity strategy at Exane BNP Paribas.

According to Thomson Reuters StarMine data, metals & miners and financials trade on respective 12-month forward price/earnings ratios of 10.1 times and 10.5 times.

This looks cheap compared with consumer staples, on 17.2 times, and healthcare on 14.7 times.

"I've already positioned for it," said Old Mutual fund manager Kevin Lilley - referring to a potential loss in leadership of defensive stocks.

Among his biggest overweight bets are banks, autos, and miners, while he is most bearish on consumer staples. The European equities funds Lilley runs have around 90 million pounds ($140.1 million) of assets under management.

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