European corporate bonds reversed earlier gains late on Friday as weaker than expected US employment numbers cast a shadow over prospects for an economic recovery.
US non-farm payrolls rose 32,000 in July, according to data from the Labour Department, against median forecasts for a rise of 228,000.
"Overall I'd say it's slightly negative for credit," said Arndt Muthreich, head of credit research at Dresdner Kleinwort Wasserstein.
He noted that cyclical companies have been accompanying better than expected results in the second quarter with upbeat outlooks, which are somewhat contradicted by the payrolls data.
"So it's kind of an interesting crossroads that we're at," Muthreich said.
"On the one hand, the fixed-income market should be supported. On the other hand, if the economy is slowing down, that would then put in question whether the good credit quality improvement we have seen could come to an end earlier than expected."
Crude oil prices near $45 a barrel, and their impact on the economy and corporate profits, were another source of concern for many investors, after a fire at a big US refinery added to fears of an oil supply crunch but corporate bond markets showed little reaction.
"It should be an issue but I think until we see headlines linking a particular company to the effect of the rising oil price, it will not be a major factor," one trader said.
General Motors' 8.375 percent euro bond due in June 2033, one of the most liquid bonds in the European market, was bid at 286 basis points over government debt, three basis points wider, having widened nine basis points during the previous session on rumours that the company's credit rating might be downgraded.
GM said on Thursday it may use cash instead of stock to pay off the principal amount of its roughly $8 billion in contingent convertible bonds, a move that credit analysts said would be mildly credit negative.
Auto bonds widened two to three basis points on average and telecoms one to two basis points on the back of the payrolls data, traders said.