European shares rebounded on Thursday after hitting one-month lows, as a global bond selloff eased and traders adjusted expectations for the European Central Bank’s monetary policy. The STOXX 600 index rose 0.5% to 649.1, marking a recovery from a string of losses over the previous three sessions. The rebound came amid signs that bond markets were stabilizing, though geopolitical tensions—particularly the escalation of the Iran conflict—continued to weigh on risk appetite and commodity prices, including oil, which remained above $95 a barrel (Brent futures stood at $104.47).
Soitec, a French chip materials company, led gains among European equities, surging 10.3% to become the top performer in the STOXX 600. The company raised its second-quarter 2027 revenue growth outlook to 50% year-on-year, up from a previous forecast of 30%, reflecting stronger demand for its semiconductor-related products. Meanwhile, advertising sector stocks WPP and Publicis rose 5.6% and 4.4%, respectively, while the broader luxury goods sector saw losses narrow to a 2% decline, though individual names like LVMH (-1.8%), Hermes (-2.0%), and Kering (-3.0%) continued to underperform.
Commerzbank gained 2.3% after announcing a new €1.2 billion ($1.39 billion) share buyback program, while Deutsche Telekom added 1.1% following Elliott Management’s acquisition of a stake in the company. The central bank-driven recovery followed a period of heightened volatility, as traders now anticipate the ECB will raise borrowing costs to 2.5% at its next meeting, with two additional quarter-point hikes expected by mid-2027. The euro zone’s services sector, which accounts for a majority of economic activity, saw growth slow to a two-month low in August, though private sector activity remained stable due to persistent demand.
Analysts noted that the market’s cautious optimism hinged on the ECB’s policy stance, with expectations of sustained high rates to combat inflation. Kathleen Brooks, Research Director at XTB, cautioned that commodity prices would remain elevated unless the conflict in Iran ended abruptly, preventing a meaningful pullback in energy markets or a long-term recovery for bonds. Ricardo Castillo, Head of Investments at Mirabaud Group, emphasized that while Brent crude prices fluctuated, the actual market prices for refined products remained at levels last seen in March and April, reinforcing the need for continued monetary restraint.
The broader economic backdrop remained fraught, with concerns over persistent inflation, rising government debt, and tighter monetary policy persisting. The rebound in European equities reflected a temporary reprieve from broader market pressures, though the outlook remained dependent on central bank decisions and geopolitical developments.
