European Shares Rebound as Inflation Pressures ECB

European shares rebounded on Friday after a sharp selloff driven by a bond market rout. The pan-European STOXX 600 rose 0.6% to 630.47 points by 1005 GMT, after touching its lowest in more than three months on Thursday.

Data showed euro zone inflation surged more than expected in September and is likely to rise further in the coming months, keeping pressure on the European Central Bank to raise interest rates again.

Michael Field, chief equity strategist at Morningstar, said 'Higher interest rates combined with elevated inflation are a negative for equities, but whether equity markets will react badly depends on how long investors feel the problem will last.'

Germany's Commerzbank dropped 1.4% after RBC downgraded the stock to 'sector perform' from 'outperform'. France presented its 2027 budget on Thursday, seeking to enact unpopular belt-tightening measures aimed at reducing the deficit and reassuring bond markets ahead of next year's presidential election.