Oil relief lifts European stocks, but telecoms tumble on SpaceX's US spectrum deal

European stocks rebounded on Friday as oil prices and bond yields eased on hopes of a pause in the Middle East war, though telecom stocks ‌slid after SpaceX's deal to acquire a nationwide spectrum portfolio in the US caused ripples across the sector. The pan-European STOXX 600 climbed 0.9% to 630.83 points by 0841 GMT, and was on course to wipe out much of its weekly decline. The index closed at a nearly four-month low ‌on Thursday as a surge in oil prices and bond yields pushed investors away from risky assets.

However, oil prices dipped more than 1% on Friday ‌after US President Donald Trump said his country would not attack Iran before the midterm elections next month, offering relief to investors worried about elevated oil prices sparking inflationary pressures and forcing major central banks to aggressively tighten monetary policy. Euro zone bond yields also pulled back after touching multi-decade highs this week on inflation concerns and soaring government debt ⁠burdens.

"Higher rates ​and rising energy prices create a ⁠toxic backdrop for Europe, given the region's greater sensitivity to both. As a result, Europe has become a funding short once again," Barclays strategists said in a note. "But while ⁠the pain may not be over yet, at least valuations and positioning have become more compelling."

Investors are now awaiting the third-quarter earnings season to gauge how ​companies are performing against a backdrop of higher inflation and interest rates, as well as political uncertainties. Analysts expect STOXX 600 companies to ⁠post a third-quarter profit growth of 21% from a year earlier, according to LSEG data, with energy and basic material firms seen providing the biggest boost.

Most European sectors rose on Friday, ⁠but ​the telecom index stumbled 3.4% to an eight-month low. Deutsche Telekom fell 8% after SpaceX struck a deal to acquire a nationwide low-band spectrum portfolio in the US, mounting a direct, orbital challenge to legacy wireless giants across the country.

Deutsche Telekom holds a 54% stake in T-Mobile ⁠US, which slid 7% in US premarket trading. Britain's Vodafone dropped 4.5%, while France's Orange fell 3.4% and Spain's Telefonica dipped 3.3%.

"SpaceX's entry into the TLC ⁠sector also in Europe is ⁠a potential competitive threat for incumbents," analysts at Equita Research said in a note. "We therefore monitor the regulatory framework to assess the extent of the threat, although we do not see in the short-to-medium term, specific risks ‌for the Italian ‌market, among the most competitive in terms of mobile prices."