European shares eye weekly loss as central banks stay hawkish

European shares dipped on Friday and were set to post declines for the week after major central banks pledged further rate hikes to combat runaway inflation, spurring concerns about a global economic downturn next year.

The Europe-wide STOXX 600 index fell 0.2% to a fresh one-month low of 427.96 at 0813 GMT and was set for losses of 2.4% for the week.

The index posted its steepest one-day drop since May in the previous session after the European Central Bank joined the U.S. Federal Reserve in saying monetary policy will continue to tighten even at the risk to the economy.

On Friday, telecom and retail stocks led the losses among the major sectors on the STOXX 600. Shares of economically sensitive banks, which have been pummelled in the past week, rose 0.1%.

An initial reading on the euro zone's economy is due at 0900 GMT, which is expected to show business activity improved in December from last month, but remained in contraction.

Among individual stocks, Tele2 AB fell 3.9% to the bottom of the STOXX 600 as Citigroup cut its price target on the telecom operator's stock. (Reporting by Amruta Khandekar; Editing by Savio D'Souza)