European Stocks Edge Higher Amid Inflation Concerns and Hawkish Fed Comments

European stocks ended the week on a modestly positive note, as investors weighed the implications of Federal Reserve Chair Kevin Warsh's hawkish comments on inflation.

The pan-European STOXX 600 index gained 0.5%, with French stocks leading the charge, rising 1% after a one-month low in the previous session.

Warsh's speech at the Jackson Hole Economic Policy Symposium sparked concerns about potential interest rate hikes, with traders increasing their expectations for a 25-basis-point hike at the Fed's September meeting to above 55%, according to the CME FedWatch tool.

The shift in expectations limited risk appetite across European markets, as higher U.S. rates can increase global borrowing costs and put pressure on equity valuations.