European shares close higher as bond selloff cools

European shares ended higher on Wednesday, stabilising as investors assessed fiscal challenges after a selloff in longer-dated bonds had sparked risk-off sentiment in the previous session.

The continent-wide STOXX 600  index closed 0.65% higher at 546.72 points, boosted by healthcare stocks  such as Roche Holdings  and AstraZeneca 

Basic resources  also extended support by rising 1.5%, influenced by a jump in copper prices on growing expectations of a U.S. interest rate cut later in the month.

The day's moves follow the STOXX 600's biggest one-day loss in a month on Tuesday, driven by a multiyear jump in bond yields amid mounting concerns about fiscal pressures in developed economies.

France's 30-year yield fell about 5 basis points to 4.4547% after hitting a 16-year high on Tuesday, but caution prevailed amid political worries as Prime Minister Francois Bayrou's government braces for a no-confidence motion next week.

Losing the key vote could collapse Bayrou's minority coalition government and push France into deeper political and fiscal uncertainty.

The developments were triggered by the prime minister's pushing through of unpopular plans for a budget squeeze in 2026.

Long-dated bond yields in Germany and Italy also settled down after the previous day's spike.

"What we see today is maybe a small correction on the poor performance that we have seen yesterday ... bonds have stabilized now, but of course the risks have not disappeared," said Teeuwe Mevissen, senior market economist at Rabobank.

Meanwhile, Adidas  climbed 4.8% after brokerage Jefferies  on the German sportswear brand to "buy" from "hold" and J.P.Morgan placed it on a positive catalyst watch. STOXX 600's retail sub-index jumped 1.5%.

Investors were also entering a volatile period, with September historically a tough month for markets.

On the data front, a private survey showed the euro zone economy kept expanding at a snail's pace in August, as weaker services growth offset improved manufacturing output.