European stocks advance for the first week in new year

European stocks rose, recording their first weekly rally of 2014, as investors assessed data that showed the US unemployment rate unexpectedly fell in December while hiring slowed.

The Stoxx Europe 600 Index advanced 0.5% to 329.95 at the close of trading, extending its highest level since May 2008. The benchmark rose 0.7% this week as data on German unemployment and U.S. private jobs beat estimates. National benchmarks added in 15 of the 18 western European markets. The U.K.’s FTSE 100 jumped 0.7%. Germany’s DAX and France’s CAC 40 rallied 0.6%.

“Investors want to see a U.S. recovery, but not too much,” said Jacques Porta, who helps manage $780 million as a fund manager at Ofi Gestion Privee in Paris. “Investors appreciate the drop in the jobless rate. At the same time, if the weak payrolls numbers continue, that may mean the Fed is not going to accelerate its tapering program.”

Jobs data showed the US unemployment rate unexpectedly dropped to 6.7% in December, the lowest since October 2008, as more people left the labor force. The report also showed US employers hired the fewest number of workers since January 2011. The 74,000 gain in payrolls, less than the most pessimistic projection of investors, followed a revised 241,000 advance the prior month.

A report showed French industrial production expanded 1.3% in November, beating the 0.4% increase predicted by economists in a Bloomberg survey. Cie. de Saint-Gobain SA, Europe’s largest supplier of building materials, added 3.1% to 40.37 euros. Vallourec SA, a maker of steel pipes for the oil and gas industry, rose 3% to 40.62 euros.

In corporate news, Deutsche Lufthansa jumped nearly 9% after the German airline said it forecasts lower fuel and restructuring costs for 2014.

Metro AG gained 2.8%. Media pointed to a report in Platow Brief, a business newsletter, that said Franz Haniel & Cie, which has a 30% stake-holder in the German retailer, may push it to sell a couple of units. Metro’s chief executive officer reportedly opposes those sales, and the report said his contract may not be renewed this year.

Among drug stocks, Novartis AG added more than 1% and Roche Holding Ltd gained 0.5%.

Brenntag AG fell 2.4% to 126.70 euros. UBS AG lowered its recommendation on the shares to neutral from buy, saying it sees limited potential for further gains after last year’s rally. The world’s biggest distributor of chemicals soared 36% in 2013.