By Joao Manuel Vicente Mauricio and Ankika Biswas
(Reuters) -Tech stocks led a recovery in European shares on Thursday after a two-day slump fueled by concerns about possible U.S. tariffs and France’s economic and political challenges, with investors now closely watching inflation reports for clues about the future trajectory of interest rate cuts.
The pan-European index rose by 0.4% to 507.23 points. Trading volumes were expected to be low with the US market closed for Thanksgiving.
The technology sector climbed nearly 1% for its best day in a week, as chip stocks rose after Bloomberg reported that the U.S. government’s Chinese chip restrictions could be less severe than expected.
Shares of ASM International (AS:), BE Semiconductor and ASML (AS:) rose between 2% and 2.5%.
France’s blue chip index also regained some lost momentum, rising 0.5% after falling to August lows in the previous session.
Defense stocks led the sector gains, boosted by a 4.1% jump in Airbus.
Sentiment waned after Christine Lagarde, president of the European Central Bank, told the Financial Times that a global trade war would be “in no one’s interest.”
French government bonds held steady after Wednesday’s sell-off took the risk premium on German bonds to their highest since the 2012 debt crisis.
French Prime Minister Michel Barnier’s government faces an uncertain future as his struggle to win approval for the 2025 budget in a polarized parliament makes his fragile coalition increasingly likely to collapse.
“We don’t think (Marine) Le Pen (leader of the far-right National Rally party) will follow through on her threats to overthrow the government any time soon, but it does remind markets of the precarious situation the country is in located. says Michiel Tukker, senior European interest rate strategist at ING.
The banking sector also provided some support to the STOXX 600, which gained 0.9%.
Inflation in Germany, Europe’s largest economy, was flat at 2.4% in November, while rising in several German states. Spanish headline inflation in November met expectations.
Inflation figures for the eurozone, France and Italy will be announced on Friday.
These reports follow persistently strong US inflation data, which raised concerns that the Federal Reserve would take a cautious approach to policy easing.
Shares of Direct line (LON:) Insurance rose 41.4% after the insurer rejected a £3.28 billion takeover bid from a larger rival Aviva (LON:), whose shares fell 2.3%.
On the other hand, Grifols (BME:) fell 11.8%, extending losses into the second session, after Canadian fund Brookfield abandoned its takeover plans.
