By Joao Manuel Vicente Mauricio and Ankika Biswas
(Reuters) -Tech stocks led the rebound in European shares on Thursday, following a two-day drop driven by concerns over potential U.S. tariffs and France's economic and political instability, with inflation reports in focus for insights into the rate-cut path.
The pan-European STOXX 600 index was up 0.6% by 0930 GMT. Trading volumes are expected to be light with the U.S. market shut for Thanksgiving holiday.
The tech sector climbed 1.8%, on track for its best day in two weeks, as chip stocks gained after Bloomberg reported the U.S. administration's China chip curbs could be less severe than expected.
Shares of ASM International (AS:ASMI), BE Semiconductor and ASML (AS:ASML) gained between 3% and 4.7%.
France's blue-chip index also regained some lost momentum, rising 0.5%, after sliding to August lows in the previous session.
Sentiment eased after European Central Bank President Christine Lagarde told the Financial Times a global trade war would be "in nobody's interest".
French government bonds held steady after Wednesday's sell-off drove the risk premium over German bonds to its highest point since the 2012 debt crisis.
French Prime Minister Michel Barnier's government faces an uncertain future, as his struggle in securing approval for the 2025 budget in a polarized parliament make it increasingly likely that his fragile coalition will collapse.
"We don't think (Marine) Le Pen (leader of far-right National Rally party) will follow up on her threats to topple the government in the near term, but it does remind markets of the precarious situation the country is in," said Michiel Tukker, senior European rates strategist at ING.
"A no-confidence vote would reset the progress made with the current budget proposal and trigger a new period of political limbo. But given new parliamentary elections cannot be held until mid-2025, timing for such a move seems presumptuous."
Inflation accelerated in several German states in November, indicating a likely increase in the national inflation rate, set to be released later in the day, while Spain's November headline inflation met expectations.
These reports follow stubbornly strong U.S. inflation data, which raised concerns that the Federal Reserve might take a cautious approach to policy easing.
Shares of Direct Line (LON:DLGD) Insurance soared 41% after the insurer rejected a 3.28-billion-pound takeover offer from bigger rival Aviva (LON:AV), whose shares were down 2.3%.
Remy Cointreau (EPA:RCOP) reversed early course to climb 4% after the wine and spirits maker's CEO said in a conference call that the company has reached bottom in the United States, and it's time to prepare for recovery.
German state-owned Uniper rose 5.3% after the utility raised its full-year outlook.
Grifols (BME:GRLS) fell 4%, extending losses to the second session, after Canadian fund Brookfield dropped its takeover plans.
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