By Ankika Biswas, Ozan Ergenay and Johann M Cherian
(Reuters) -European stocks closed lower on Friday, but off their over one-month intraday low, as anxiety around escalating Middle East tensions seemed to ease, while French cosmetic giant L'Oreal logged its best day since early January after robust results.
The continent-wide STOXX 600 closed 0.1% lower, but notching its biggest weekly decline of 1.2% since mid-January owing to renewed focus on geopolitical tensions that steered investors away from risky assets and a rout in technology stocks.
Explosions echoed over an Iranian city in what sources described as an Israeli attack, but Tehran played down the incident and indicated it had no plans for retaliation - a response that appeared gauged towards averting region-wide war.
"The Israeli retaliation was less severe than had been feared and so far it appears that Iran has taken the more limited response as a signal that the rhetoric needs to be dialled down and both sides step back," said Stuart Cole, chief economist at Equiti Capital.
"But the market will remain cautious as nothing can be taken for granted."
As for major earnings, L'Oreal jumped 5% after beating expectations with a strong rise in first-quarter sales.
Schneider Electric (EPA:SCHN) dropped 3.2% as the French company is in talks with U.S. engineering software producer Bentley Systems over a potential "strategic transaction".
Royal Unibrew A/S jumped 18.1% after the Danish brewer posted first-quarter results above expectations and raised its full-year outlook.
Warehouses De Pauw climbed 3.1% after first-quarter results showed signs of stabilisation in its rental portfolio.
With markets gearing up for the full volley of corporate reports in the weeks to follow, first-quarter earnings are expected to have decreased 12.1% year-on-year, LSEG data showed on Tuesday.
Among others, Volvo shed 4.1% after its second biggest shareholder Geely Holding sold part of its stake in the Swedish truck maker.
The technology sector dropped 1.7%, with Switzerland's Comet Holding losing 3.4% after first-quarter results. The sector has been the worst hit this week knocked down by chip equipment maker ASML Holding (AS:ASML)'s weaker-than-expected first-quarter bookings on Wednesday.
On the flip side, the telecom sector jumped 1%, led by a 4.4% rise in Finland's Elisa following first-quarter results.
On the data front, producer prices in the euro zone's largest economy Germany fell less than expected in March, dropping 2.9% year-on-year.
Providing some relief, European Central Bank President Christine Lagarde said euro zone inflation is likely to decline further and interest rates could be cut if its long-standing price growth criteria are met.