Volkswagen Rally Fails to Lift European Stocks Amid Inflation Worries

European stocks closed lower for the week on Friday, despite a rally in Volkswagen shares. The STOXX 600 index fell 0.8% over the week, driven by concerns about inflation and rising energy costs.

The market volatility was also fueled by escalating conflict in the Middle East, which sent crude prices higher. However, the release of US non-farm payrolls data showing a surge in August helped steady sentiment.

Volkswagen shares jumped 5.9% to reach a two-month high after the automaker's supervisory board approved a major turnaround plan. The company faces pressure from US import tariffs and aggressive Chinese rivals, but investors view the cost-cutting measures as positive.

Market analysts expect further rate hikes in Europe, with JPMorgan and BNP Paribas predicting a 25-basis-point increase at the ECB's next policy meeting.