European Stocks Bounce Back as Rate Hike Fears Ease

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 index closed 0.8% higher, after touching its lowest in more than three months on Thursday. US job growth slowed more than expected in September, with figures for the prior two months revised sharply downward.

Markets 'dodged a bullet' with a weaker-than-expected jobs report, said Ronald Temple, managing director of Lazard Asset Management, likely taking an October Fed rate hike off the table. However, the Fed will be compelled to tighten policy again, as inflation data is still due for release.

Bond yields declined, with the German 10-year bund yield down over 6 basis points at 3.454%. The oil price also fell by $3 a barrel, further aiding risk appetite. Despite gains in the session, the STOXX 600 posted weekly declines, with most sectors ending in positive territory.