European Stocks Rebound from Bond Market Rout Amid Inflation Concerns

European stocks 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, recovering from its lowest level in over three months.

The surge in euro zone inflation, which jumped more than expected in September and is likely to rise further in the coming months, kept pressure on the European Central Bank (ECB) to raise interest rates again. The ECB lifted interest rates last month, and traders are currently pricing in 81.8% chances of a rate hike in December.

Equities have been battered in recent weeks as global government bond yields surged to multi-year highs, leaving investors averse to risk assets. European banking stocks dipped 0.3%, hurt by concerns about higher interest rates denting the economy.