European equity markets showed signs of recovery on Thursday as a decrease in global bond yields provided support for stocks, which had recently experienced a significant sell-off, particularly in the technology sector. The pan-European Stoxx Europe 600 Index increased by 0.11%, rebounding from early intraday losses thanks to a pullback in sovereign borrowing costs that eased valuation pressures.
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London's FTSE 100 rose by 1.0%, outperforming its continental counterparts. France's CAC 40 gained 0.5%, while Germany's DAX declined by 0.1%, weighed down by its heavy exposure to semiconductor and software stocks.
A key driver behind the gains in European equities was the notable retreat in global bond yields, which fell from multi-decade highs following a surge triggered by U.S. inflation data released on Wednesday. The benchmark 10-year U.S. Treasury yields hovered near 4.90% after reaching 5.33% overnight, alleviating pressure on high-multiple growth stocks. A shift towards safe-haven government bonds contributed to lower European sovereign yields, providing relief to equity valuations across the region.
Despite the overall index recovery, European technology shares were at the center of significant selling activity, reversing earlier gains sparked by ASML Holding NV's strong third-quarter results. ASML and ASM International each fell by 5.4%. The losses extended throughout the semiconductor sector, with BE Semiconductor decreasing by 5.7%, STMicroelectronics declining by 7.5%, and Infineon Technologies dropping by 8.6%. Following ASML's positive sales outlook, macro investors resumed aggressive selling in high-beta chip stocks, amidst a broader global tech sell-off originating from Wall Street.
As the third-quarter earnings season unfolds, institutional investors are hopeful that upcoming results will revive European stocks, which have been struggling with persistent losses amid high global borrowing costs. Earlier in the week, luxury giant LVMH disappointed market expectations with its weaker-than-anticipated third-quarter sales, highlighting declining consumer sentiment in China and its impact on discretionary margins.