European shares edged higher on Friday, helped by gains in defensive sectors such as real estate and consumer staples, while investors also hoped for a diplomatic breakthrough next week to ease Russia-Ukraine tensions.
The pan-European STOXX 600 index inched up 0.2%, but conflicting headlines over Russia's invasion plans put the benchmark on course for a near 1% weekly loss.
Selling pressure on equities eased after the US Secretary of State agreed to a meeting next week with Russia's foreign minister, raising hopes of a diplomatic solution.
"There is a higher probability either of a diplomatic solution or some kind of an incursion but fairly contained," said Hani Redha, multi-asset manager at PineBridge Investments.
Sectors such as food & beverage and real estate , considered stable during times of economic uncertainty, led the European index higher, while travel and oil stocks fell the most.
Markets have gyrated this week following news of shelling in eastern Ukraine and warnings from Western leaders that an invasion could happen at any time, even though Moscow has denied it.
European banks and insurers bore the brunt of the selloff, shedding more than 4% so far this week.
While earnings continued to be largely supportive, investors also feared aggressive monetary policy tightening measures from the US Federal Reserve and other major central banks to combat surging inflation.
"Since late last year, we began to reduce risk because we saw a lot of policy withdrawal challenges that markets will have to go through," said Redha.
Renault gained 0.8% as the French car maker swung to profit in 2021 and said it plans to repay the state aid received during the pandemic ahead of schedule.
Finnish drug manufacturer Orion jumped 19.3% to the top of STOXX 600 following positive trial results for its prostate cancer treatment.
Among weak spots, luxury group Hermes fell 4.1% after its fourth-quarter sales grew a touch below market expectations and self-imposed production caps meant the group could not keep up with demand for its handbags.
Power utility EDF slipped 5.0% after announcing a rights issue, which it said will raise an approximate total of 2.5 billion euros ($2.84 billion).
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