European stock markets rose 1.1% - Stoxx 600 posted its best daily performance in more than three months

European stock exchanges saw a sharp rally on Friday. A pause in the rise of government bond yields boosted investor sentiment and allowed markets to recover losses accumulated during the week.

The pan-European Stoxx Europe 600 index rose 1.1%, posting its best one-day performance since July 2. Thanks to Friday's gains, the index closed the week up 0.2%, avoiding a second consecutive weekly decline.

Among the major European markets, Germany's DAX showed the strongest gain, rising 1.3%. France's CAC 40 added 0.93%, Spain's IBEX 35 rose 1.11%, Italy's FTSE MIB gained 1.1%, and Britain's FTSE 100 also rose 1.1%.

One of the main drivers behind the market recovery was a decline in French government bond yields. The 10-year bond yield had earlier approached its highest level since 2002, around 4.90%. Its decline narrowed the spread with equivalent German bonds and eased pressure on European equities.

The drop in yields also supported shares of major French banks. Throughout the week, these stocks had been under pressure from concerns that high government bond yields would weaken banks' capital positions and raise their funding costs. On Friday, shares of BNP Paribas, Crédit Agricole and Société Générale rose between 0.5% and 1%.

The opposite trend was seen in the telecommunications sector. News that SpaceX would acquire investment firm Grain Management's low-band radio spectrum portfolio for $8 billion fueled concerns that satellite communication services will compete with traditional telecom operators over the long term.

Deutsche Telekom shares fell 8%, weighed down further by the company's controlling stake in T-Mobile US. Britain's Vodafone declined 4.5%, France's Orange fell 3.4%, and Spain's Telefónica dropped 3.3%.

Against this backdrop, shares of French semiconductor materials maker Soitec rose 7%. BofA Securities upgraded the stock's rating from "neutral" to "buy" and raised its price target from €152 to €300.