By Sudeshna Ghoshal and Purvi Agarwal
Oct 6 (Reuters) - European shares rose on Tuesday, buoyed by broad gains across sectors as euro zone bond yields eased after a recent rally driven by fiscal and inflation concerns.
The pan-European STOXX 600 index closed 0.5% higher, paring some gains from earlier in the day, and rising for a third consecutive session.
Most sectors ended higher, with travel and leisure stocks up 1.4%, leading gains. Oil prices fell 2% on Tuesday, as increased Middle Eastern crude
exports eased supply concerns. [O/R]
Danish biotech firm Genmab climbed 4.4% to a three-year high after Genmab and US drugmaker AbbVie's combination treatment for patients newly diagnosed with a type of lymphoma reduced the risk of disease progression or death in a late-stage study.
The broader healthcare index rose 0.6%, with gains limited by a 5.5% fall in Zealand Pharma.
Euro zone bond yields eased, having touched multi-decade highs last week. The spread between French and German 10-year yields narrowed further from its peak of last Friday as investors assessed whether the recent surge in France's risk premium had gone too far, too quickly.[GVD/EUR]
Heavyweight banks gained 1.1% as risk appetite increased.
The euro hovered near a 17-month low, weighed down by worries over France's high debt burden and a political gridlock. Political uncertainty in the region has deepened after Spanish Prime Minister Pedro Sanchez called a snap election on Monday.
"Renewed fiscal and political concerns in France are compounding pressures from the energy shock... but the pace of the recent move suggests position-unwinding rather than a sudden shift in fundamentals," said Laura Cooper, global investment strategist and head of macro credit at Nuveen.
Cooper also said that "signs of contagion", that include sustained foreign selling of French debt and heavier reliance of French banks on the central bank had not yet emerged.
MARKETS SCALE BACK ECB TIGHTENING BETS
The recent turmoil in bond markets has prompted investors to dial back their expectations for interest rate hikes from the European Central Bank.
Markets had been pricing in at least three more hikes by the bank's March meeting but now are just fully pricing in one hike and around an 80% chance of a second.
Persistently high rates raise borrowing costs for companies and mortgage holders, while increasing governments' interest burdens.
Among other stocks, Italy's Technoprobe gained 2.8% after J.P.Morgan initiated coverage on the stock with an "overweight" rating.
Shares of Spanish property developer Neinor Homes rose 5% after the company raised its 2026-2027 outlook, unveiling 2028 targets and announcing a planned €200 million- €250 million ($225 million-$281 million) dividend payout for 2028.
(Reporting by Sudeshna Ghoshal and Purvi Agarwal in Bengaluru; Editing by Mrigank Dhaniwala, Tasim Zahid and Susan Fenton)
