Europe's Stocks Rise Amid Rate Hike Fears, US Inflation Data Looms

European stocks edged higher on Friday but were set for their biggest weekly decline in about two months. The pan-European STOXX 600 was up 0.4% at 638.63 points by 0837 GMT, while other major regional bourses also traded higher.

The rise comes despite elevated bond yields and fears about aggressive interest rate hikes, which tempered sentiment ahead of key U.S. inflation data. The European Central Bank's recent decision to raise interest rates and warn of higher inflation due to soaring energy prices in the Middle East has added to market jitters.

Government bond yields across the globe have surged as traders expect major central banks to keep interest rates higher for longer. The U.S. 10-year Treasury yield, a benchmark for global borrowing costs, hovered below the closely watched 5% level. The German 10-year yield stayed near multi-decade highs.

Market analysts attribute the market turmoil to a combination of factors, including rising oil prices and expectations of further interest rate hikes in the U.S. 'The main drivers really lie from the U.S. and with oil prices,' said Chris Beauchamp, chief market analyst at IG.