European stocks rebound along with U.S. equity futures as bond yields stabilize

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Investors were getting a breather from a recent selloff driven by concerns that a pandemic resurgence could complicate a global recovery, with European stocks rebounding along with U.S. equity futures, as bond yields stabilized on Friday.

The Stoxx Europe 600 index rose 0.7% to 454.69, after a drop of 1.7% on Thursday. The German DAX rose 0.6%, the French CAC 40 gained 1.3% and the FTSE 100 added 0.6%.

U.S. stock futures were bouncing higher, with Dow Jones Industrial Average futures up more than 100 points, and S&P 500 and Nasdaq-100 futures up around 0.3% percent each. Thursday’s session saw the Dow S&P 500 and Nasdaq Composite all book their worst daily percentage drops since June 18 over concerns that the global economy recovery could by stymied by resurgent COVID-19 cases in some countries.

Concerns about a slower recovery and fading fears of sticky inflation drove a sharp drop in bond yields, with the 10-year U.S. Treasury yield  hitting 1.25% at one point on Thursday, its lowest since February. But that yield was back up to 1.33% on Friday.

Japan declared a state of emergency in Tokyo that would continue through the Olympics, amid concerns a COVID-19 surge could multiply during the Games. Cases are rising across parts of the U.S. and Europe, with the U.K. and Portugal in particular struggling amid a wave of cases driven by the delta variant.

Soccer’s Euro 2020 final between Italy and England will take place on Sunday. More than 60,000 in the U.K. attended the semifinal between England and Denmark earlier this week. Italy will also reportedly fly in 1,000 fans who will be travel in and out of the country on Sunday, segregated in the stands and required to quarantine upon their return.

G-20 finance ministers and central bank governors will meet in Venice, Italy on Friday and Saturday to discuss tax reform and progress on recoveries amid the pandemic.

Data out on Friday showed the U.K. economy slowed in May, after a sharp rise in April as coronavirus restrictions eased and the economy got a boost. Fueled by services, gross domestic product grew 0.8% on the month, the Office for National Statistics said. April’s growth was revised down to 2% from a prior estimate of 2.3%.

Pharmaceutical stocks drove some of the gains in Europe, with Novartis shares up 1.3% and those of Roche Holding up 0.4%.

Luxury goods makers were on the rise, with LVMH Moët Hennessy Louis Vuitton up 2.8%, Burberry 3.4% higher, Swatch Group up 3% each, and Hermès International rising more than 2%.

Energy companies leading the downside, though oil prices were modestly higher. Shares of TotalEnergies and Royal Dutch Shell fell 0.6% and BP edged 0.1% lower.

Deal news drove shares of Vectura Group 13% higher. Philip Morris International said Friday that its subsidiary PMI Global Services has agreed to bid for the U.K. maker of inhaled therapies for the treatment of respiratory diseases in a deal valued at 1.05 billion pounds ($1.45 billion) in cash.

The acquisition is part of Philip Morris’s expansion into products beyond tobacco and nicotine, the company said.

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