(Reuters) - European stocks continued their rebound on Thursday from a bruising sell-off earlier this week, but were set for monthly declines on worries about a slowing global economy and higher inflation.
Defensive sectors such as real estate, healthcare and food & beverages also rose.
The European stocks benchmark is on track to end September with losses of 2.8% after a seven-month winning streak, as a surge in government bond yields drove investors out of high-growth sectors such as technology into economically sensitive banking and energy stocks.
“Recent market moves suggest that a rotation is under way in favour of sectors and assets that benefit from a consumption shift from goods towards services,” BCA analysts said in a note.
“Given that we do not expect rising interest rates to have a damaging impact on the real economy over the coming 12-18 months, we recommend that investors maintain a moderate overweight allocation to stocks.”
A growing number of risks including hawkish stance from the U.S. Federal Reserve, supply-chain constraints and Chinese property developer Evergrande’s financial troubles have weighed on sentiment this month, even as investors bet on a steady European economy.
Defensives-heavy Swiss market is among the biggest decliners this month, while banking-heavy Spanish and British indexes remained buoyant.
Among individual stocks, Sweden’s H&M was flat after the retailer said supply disruptions hit sales in September, while spirits maker Diageo Plc gained 2.5% after it forecast a boost to operating margins as people opt for premium brands.
Swedish cloud communication services provider Sinch rose 4.4% after saying it had agreed to buy cloud-based email delivery platform Pathwire in a deal worth about $1.9 billion.
British online fashion retailer Boohoo tumbled 10.7% as it warned that freight inflation and higher wages for its distribution centre workers would impact full-year profit margins.
Reporting by Sruthi Shankar in Bengaluru; Editing by Subhranshu Sahu and Arun Koyyur