FRANKFURT: European stocks rebounded on Friday, after a bond-driven selloff, as retreating oil prices and softer-than-expected US jobs data eased expectations for near-term rate hikes by the Federal Reserve.
The pan-European STOXX 600 closed 0.8 percent higher, after touching its lowest in more than three months on Thursday.
US job growth slowed more than expected in September and figures for the prior two months were revised sharply downward, prompting traders to pull back on US rate hike bets for October.
“Markets dodged a bullet with a weaker-than-expected jobs report likely taking an October Fed rate hike off the table,” said Ronald Temple, managing director of Lazard Asset Management.
“But with two more months of inflation data to be released before the December meeting, the Fed will be compelled to tighten policy again.”
Bond yields declined, with the one on the German 10-year bond, a benchmark for the euro zone, down over 6 basis points at 3.454 percent. Oil prices also fell by USD3 a barrel, further aiding risk appetite.
The surge in global government bond yields has battered equities in recent weeks, leaving investors averse to risk assets. Despite gains in the session, the STOXX 600 posted weekly declines.
Most sectors ended in positive territory on Friday, with renewed AI enthusiasm putting technology stocks in the lead. AT & S Austria Technologies & Systemtechnik gained 10 percent, Infineon Technologies was up about 9 percent, while Aixtron and Soitec added 7.6 percent each.
European banking stocks were little changed on Friday but registered their biggest weekly fall since April, hurt by concerns about higher interest rates denting the economy.
Meanwhile, data showed euro zone inflation surged more than expected in September and is likely to rise further in the coming months.