The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, February 15, 2022.
The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, February 15, 2022. Reuters / STAFF

European shares inched higher on Friday, recouping some lost ground from the previous session's nearly 2% slump following the European Central Bank's hawkish decision to stop pumping money into financial markets this summer.

The pan-European STOXX 600 index firmed 0.6% and was set to clock its first weekly gain in four.

The ECB on Thursday paved the way for an interest rate hike as soaring inflation outweighed concerns about the fallout from Russia's invasion of Ukraine, while U.S. data showed consumer prices surged in February to a 7.9% annual growth rate, the hottest reading in 40 years.

"Central banks now have less flexibility to cushion shocks to equity markets, as they have succeeded in doing over recent years," said Mark Haefele, chief investment officer at UBS Global Wealth Management.

Investors stampeded out of European equities at their fastest pace on record, the Bank of America showed in a weekly report, with investors pulling out $13.5 billion from European stocks as the war forced investors to seek shelter in safe-haven assets such as gold and cash.

"Although our base case remains for a ceasefire and a reduction in hostile rhetoric between Russia and NATO by the summer, this outcome looks some way off ... the war is adding a lack of clarity over commodity prices, global growth and inflation," Haefele added.

Goldman Sachs downgraded its 2022 euro area growth forecast on Thursday to 2.5% from 3.9%, citing risks of further escalation in the Russia-Ukraine crisis.

Oil stocks were among the biggest gainers on the day, advancing 1.5%, and were headed for their best week in more than a year as crude prices saw volatile swings on a supply shock from the Ukraine war and renewed efforts to bring more supply to the market. [O/R]

Tod's gained 3.6% as the Italian fashion group expressed optimism for 2022 despite global uncertainty, while shares of infrastructure group Atlantia gained 1.1% after the company flagged expectations of core profit rising 27% by 2024..

EssilorLuxottica added 3.5% after the luxury eyewear group reported its best quarter of 2021 with all regions exceeding pre-pandemic sales.

German speciality chemicals maker Lanxess strengthened 2.9% after the company issued quarterly profit outlook above expectations.