By Danilo Masoni
MILAN (Reuters) - European shares fell to their lowest level in almost six months on Friday after a roller coaster week marred by a historic spike in volatility on worries a comeback of inflation would speed a shift to tighter monetary policies.
Redemptions from European Equity funds reached 80-week highs, data from EPFR showed, while the pan-regional STOXX 600 <.STOXX> index ended at 368.61 points, down 1.5 percent on the day and 5 percent on the week, its worst week in 2 years.
"It has certainly been a chaotic trading week for the global equity markets, amid fears of mounting inflationary pressures and higher interest rates," FXTM analyst Lukman Otunuga said.
The euro zone volatility gauge <.V2TX> rose on Friday to its highest level since the Brexit vote before ending at 34.7 points.
This week's sell-off followed a stronger-than-expected jobs report in the U.S. earlier this month that fueled worries over inflation and concerns the Federal Reserve will raise rates in the world's largest economy at a faster pace than expected.
On Thursday the Bank of England said it was likely to raise interest rates sooner.
Investors are concerned that tighter monetary policies could hit equities whose valuations have been boosted by years of loose financial conditions. So far this year the pan-European benchmark is down 5.3 percent.
Banks <.SX7P>, whose lending businesses benefit from rising rates, ended the week down 4.6 percent, in line with the broader market weakness following a strong start to the year.
"As rates begin to normalize (and that's what they are doing) bank margins should begin to recover. So ... the banks represent an oasis of opportunity in a tumultuous market," said Rob James, financials analyst and manager at Old Mutual.
Citi strategists said in the medium term financials should do well, keeping their overweight rating on the sector within their positive stance on cyclicals.
On Friday, Italian investment bank Mediobanca <MDBI.MI> rose 0.7 percent after it raised its dividend guidance and quarterly profit beat forecasts on higher net interest income and fees.
UBI Banca <UBI.MI> declined 0.4 percent as it planned to sell a "substantial package" of bad loans over the next three years in an acceleration of efforts to clean up its balance sheet.
Still among financials, French asset manager Amundi <AMUN.PA> lost 5.8 percent after publishing its annual results and new financial targets.
Energy shares fell as oil prices dropped for a sixth day after Iran announced plans to boost production and U.S. crude output hit record highs.
The oil and gas index <.SXEP> lost 1.9 percent with Royal Dutch Shell <RDSa.AS> and BP <BP.L> both down more than 2 percent.
A.P. Moller-Maersk <MAERSKb.CO> missed fourth-quarter profit expectations and edged 0.3 percent lower.
Belgium's Umicore <UMI.BR> jumped 7.8 percent after raising 892 million euros in equity for new investments in rechargeable battery materials at a discount of only 2.7 percent to Thursday's closing price.
Shares in French cosmetics group L'Oreal <OREP.PA> rose 0.3 percent after its fourth-quarter sales beat expectations and comments by its CEO regarding its intentions on Nestle's <NESN.S> stake further buoyed the stock.
According to Thomson Reuters I/B/E/S. European earnings growth forecasts for the fourth quarter have been revised to 11 percent from nearly 18 percent a few months ago. Earning beats so far have been below the 50 percent of the typical quarter.
(Additional reporting by Julien Ponthus in London)