European Shares Caught Between Soaring Commodity Sector And War Worries

European shares ended a choppy session slightly higher on Friday but were down on the week as investors worried about the fallout from the Russia-Ukraine conflict, while a rally in the commodities sector kept a lid on declines.

The pan-European STOXX 600 index added 0.1%, with losses for banks and some defensive stocks offsetting gains in energy, basic materials and technology names.

"Some late weakness has seen equities fall back, but overall the rally in equities is still going," said Chris Beauchamp, chief market analyst at online trading platform IG.

"Nervousness remains, but equities have moved through the week without giving back too much ground."

After two weeks of the gains that saw it rise more than 7%, the STOXX 600 lost 0.2% this week, as lofty energy and commodity prices from sanctions on Russia fanned inflation fears and stoked worries about an economic growth slowdown.

The United States will work to supply liquefied natural gas to the European Union this year to help it wean off Russian energy supplies, Western leaders said, as Russia warned payment in roubles for natural gas exports was just days away, exacerbating supply shortage worries.

Germany said it has made significant progress towards reducing its exposure to imports of Russian gas, oil and coal.

Europe's basic materials sector is up a whopping 20% so far this year and the energy index is 15% higher.

The Ukraine crisis is likely to reduce prospects for global growth in the coming year, U.S. Treasury Secretary Janet Yellen warned on Friday.

German business morale deteriorated in March due to worsening supply chain issues resulting from high petrol prices, but the country is not facing a recession in the first quarter due to the Ukraine war, the Ifo institute said on Friday.

"Equities are seen as a relatively good hedge in case of inflation, but the type of inflation that we're currently seeing is a supply shock, which is unlike the demand destruction caused by COVID-19," said Elwin de Groot, senior market economist at Rabobank.

"In a broad sense, you can question whether companies can sail through this without any damage."

Telecom Italia rose 1.8% as sources said CVC Capital Partners and rival private equity investors are looking at a potential investment in the services arm of the company.

Generali firmed 1.9%, lifted by a new plan for the insurer that targets higher growth.

Sweden's Trelleborg AB vaulted 23.2% after Yokohama Rubber Co agreed to buy Trelleborg Wheel Systems for 265.2 billion yen ($2.18 billion).