MILAN (Reuters) - European shares rebounded from six-month lows on Monday as jitters over a sudden spike in volatility that wiped off $1 trillion in market capitalization last week appeared to ease.
Broad-based gains helped the pan-European STOXX 600 index close 1.2 percent higher, after ending on Friday at its lowest level since August. The UK's FTSE .FTSE and Germany's DAX .GDAXI rose 1.2 and 1.5 percent respectively.
The euro zone volatility index .V2TX fell back from peaks hit last week when a spike in inflation expectations boosted bond yields and fueled worries over central bank tightening.
“We see this as a short-term correction rather than an end of cycle event,” UBS strategists led by Nick Nelson said.
“What could change that would be a significant move up in bond yields, well above current levels, combined with major inflation fears,” they wrote, noting however that fundamentals for European equities remained supportive.
The STOXX is down 4.1 percent since the beginning of the year.
The cyclicals sectors which had led the sell-off drove the bounce on Monday, with materials stocks .SXPP among the best-performing sectors, up about 1.9 percent.
Car maker Renault (RENA.PA) added 3 percent as the French government said it would back boss Carlos Ghosn’s nominee for chief operating officer but wanted an agreement to transform the Renault-Nissan alliance into an “integrated” automotive group.
Akzo Nobel (AKZO.AS) rose 1.9 percent after a source-based Financial Times report said that U.S. private equity giant Apollo had teamed up with the biggest Dutch pension fund to buy the group’s 10 billion-euro specialty chemicals unit.
Heineken (HEIO.AS) fell 2 percent after the world’s second largest brewer lowered its margin growth target, blaming a volatile market environment and an acquisition in Brazil.
SES (SESFd.PA) fell 10.7 percent after it announced it would replace its CEO and CFO shortly before reporting its results.
($1 = 0.8155 euros)
Reporting by Danilo Masoni; Editing by Gareth Jones