By Danilo Masoni
MILAN (Reuters) - European shares rose on Wednesday in a broad-based bounce that saw the battered tech sector recover following a widespread sell-off on worries over iPhone demand and pricey valuations.
Italian banks also rose but came off highs after the League Party denied a report that Matteo Salvini, its leader and the deputy Prime Minister, was willing to compromise on the budget.
The STOXX 600 (STOXX) rose 0.5 percent by 1000 GMT, and was set to snap a five-day losing streak that had pushed the pan-European benchmark close to the nearly two-year low hit last month.
Germany's DAX (GDAXI) index rose 0.6 percent and London's FTSE 100 (FTSE) added 0.7 percent.
Italian banks (FTIT8300) rose as much as 2.6 percent at the open after a report said Salvini might be open to review the government's 2019 budget, fuelling hopes the country could avert a clash with the European Commission.
But later they pared some gains as the League Party said Salvini was not seeking any changes to the 2019 draft budget. The European Commission is set to release its response to Italy's draft plan later in the day.
The Italian banking index was up 2.3 percent.
Italian banks have lost around 40 billion euros in market cap from their May peak as worries over Italy's spending plans lifted government bonds yields to multi-year highs, eroding the value of their large sovereign bond portolios and raising the risk of possible capital injections for the weakers lenders.
Top gainer among Italian banks was Milan-based Banco BMP (MI:BAMI), which rallied 6 percent to the top of the euro STOXX index, while heavyweigh lenders Intesa Sanpaolo (MI:ISP) and UniCredit (MI:CRDI) rose 2.6 and 1.8 percent respectively.
The broader European banking index (SX7P) was the biggest sectoral gainer in early morning trading, up 1.4 percent, while tech stocks (SX8P) advanced 0.6 percent, after falling to their lowest level since the end of February.
Stocks supplying chips to Apple (NASDAQ:AAPL) rose. STMicroelectronics (MI:STM), Infineon (DE:IFXGn) and AMS (S:AMS) rose between 1.7 percent to 3.7 percent.
Even though the rebound was broad-based with most sectors trading in positive territory, investors remained cautious over the outlook for the market due to lingering concerns over slowing economic and earnings growth.
"The record highs for the FTSE 100 and the DAX ... now seem a distant memory and with the U.S. FAANG (Facebook (NASDAQ:FB), Apple, Amazon (NASDAQ:AMZN), Netflix (NASDAQ:NFLX) and Google (NASDAQ:GOOGL)) rally now also in bear market territory, the big question now is how much further can we fall, or are we near a short term base?," said CMC Markets analyst Michael Hewson.
Elsewhere, corporate updates triggered sharp share price moves. Babcock (L:BAB) plummeted 8 percent after the British defence contractor took a one-off charge of 120 million pounds to reshape its business and warned that revenue from its nuclear decommissioning division would drop more than expected.
Indivior (L:INDV) fell 13 percent after it warned it could take a hit if the rival drug from Dr. Reddy's Laboratories (NS:REDY) comes to market this year.
Johnson Matthey (L:JMAT) led gainers on the STOXX, up 8 percent, after the speciality chemicals company raised its full-year guidance.