By Medha Singh and Utkarsh Hathi
Aug 28 (Reuters) - European shares rose on Friday, as French stocks rebounded from the previous session's selloff, while investors assessed Federal Reserve Chair Kevin Warsh's speech at Jackson Hole.
The pan-European STOXX 600 index closed 0.5% higher at 655.16 points, posting a modest weekly gain after two consecutive weekly declines.
France's CAC 40 firmed about 1% after sliding to a one-month low in the previous session, when worries over the government's ability
to rein in public finances ahead of next year's elections rattled investors.
French lenders Societe Generale, BNP Paribas and Credit Agricole rose between 1% and 1.9%, after slumping in the prior session.
EssilorLuxottica gained 2.4% after announcing a share buyback plan. Luxury stocks firmed 2.3%, recording their best day in more than a month.
Still, fresh data underscored the challenges facing France's economy. Second-quarter GDP growth was revised down to flat from a preliminary 0.2% expansion, signalling weaker-than-expected momentum in the euro zone's second-largest economy.
"These figures suggest that the economy came very close to a technical recession in the first half of the year," said Charlotte de Montpellier, senior economist at ING.
De Montpellier said that additional fiscal consolidation measures will be needed in 2026 to keep the public deficit below 5%.
"Without further measures, and with growth remaining so weak, the deficit could end up even higher than last year."
Fitch is expected to review France's rating later in the day, a year after it downgraded the country to a record-low A+.
Markets also assessed Warsh's Jackson Hole speech, with the Fed chair reiterating his focus on bringing inflation back to the central bank's 2% target, while offering little guidance on future policy moves.
"We are entering a new era of monetary policy, one defined by less signalling, greater emphasis on real-time data, and a willingness to rethink economic first principles as AI reshapes the economy's productive capacity," said Jeffrey Roach, chief economist, LPL Financial.
Traders have increased their bets on ECB rate hikes in recent weeks as the U.S.-Israeli war with Iran has again pushed up energy prices, weighing on the STOXX 600.
Most European sub-sectors were higher, with energy stocks, this week's top laggard, firming 0.3%.
Automakers advanced 2.5%, their biggest gain in more than two months, led by Germany's BMW, which added 4.5%.
Among other movers, Strabag jumped 15.8%, hitting a record high, after the Austrian construction group lifted its annual outlook.
Belgium's Ackermans & Van Haaren gained 8.2% after reporting first-half results and upgrading its net profit growth outlook.
(Reporting by Medha Singh and Utkarsh Hathi in Bengaluru; Editing by Devika Syamnath and Deepa Babington)
