European shares fell on Friday, weighed down by rate-sensitive sectors like real estate, following a stronger-than-expected U.S. jobs report that dampened hopes for near-term Federal Reserve rate cuts.

The STOXX 600 index declined 0.5%, hitting session lows after the data, although it is set for its first weekly gain in nearly a month. The U.S. Labor Department reported significant job growth in May, suggesting the Fed is unlikely to cut rates before September.

Eugenio Aleman, the chief economist at Raymond James, noted the strong labour market would delay any rate cuts. Real estate led sectoral losses, falling nearly 3%, with German real estate group Vonovia plunging 6.9% following a downgrade by Morgan Stanley. Utilities, another rate-sensitive sector, dropped 1.6%.

Government bond yields across Europe rose, with the 10-year bund yield at 2.619%. This follows the European Central Bank’s (ECB) 25-basis-point rate cut on Thursday, its first since 2019, but provided no clear direction on future rate moves. Finnish ECB policymaker Olli Rehn mentioned that inflation is expected to decline, while Bundesbank President Joachim Nagel emphasized the ECB’s restrictive stance.

In individual stocks, Swiss banking software firm Temenos gained 3% after announcing a new share buyback program worth up to 200 million Swiss francs. Italy’s leading bad loan company doValue rose 4.5% as it prepared to acquire rival Gardant in a deal valued at 230 million euros in cash and additional stock.