European stocks on Friday finished deeply in the red a day after scoring their best session in a month, with bank shares under pressure amid a ramp up in U.S.-China trade clash. However, most of the major European bourses retained weekly gains.

The broader Stoxx Europe 600 Index SXXP, -0.77% fell 1% to 389.13, topped by the consumer goods and industrial sectors. For the week, however, the pan-European index posted a 1% weekly advance, representing its best such rise since the period ended May 11, according to FactSet data.

On Thursday, the index jumped 1.2%—its best gain since April 5, driven largely by a tumble in the euro.

Germany’s DAX 30 index DAX, -0.36% retreated by 0.7% to 13,010.55, but posted a 1.9% weekly advance, and Spain’s IBEX 35 IBEX, +0.08% dropped 1.1% to 9,851, but held on to a 1.1% weekly climb. The U.K.’s FTSE 100 UKX, -0.86% lost 1.7% to 7,633.91, producing its worst daily tumble since Feb. 6, and ending with a weekly skid of 0.6%.

Italy’s FTSE MIB index I945, +0.13% shed 1.3% to 22,190.45, but still finished the period with a weekly rise of 3.9%, while France’s CAC 40 index PX1, -0.58% gave up 0.5% to 5,501.88, but booked a weekly return of 1%.

Read: 5 key takeaways from the ECB’s decision to wind down its bond buying

The euro EURUSD, -0.20% traded at $1.1590, up from $1.1569 late Thursday in New York.

What’s driving markets?

European bourses had a listless start before most moved lower alongside a slide in U.S. stock futures US:YMU8. Those moves followed reports of a second wave of tariffs on Chinese goods by the U.S.

Indeed, President Donald Trump announced levies on about $50 billion in Chinese goods, and Beijing responded with retaliatory tariffs on U.S. products.

In Europe, bank stocks fared the worst Friday. The Stoxx Europe 600 Bank Index SX7P, +0.42% finished down 1%. Lenders were under pressure after the ECB on Thursday said the eurozone’s interest rates—which are at all-time lows—will remain at their present levels “at least through the summer of 2019,” and that the central bank will closely monitor inflation developments.

Bank profits are helped by higher interest rates, as that increases the spread banks earn between longer-term assets, such as loans, and shorter-term liabilities.

On Friday, Eurostat confirmed its initial estimate of a 1.9% inflation rate for the eurozone in May year-over-year, meeting expectations. The ECB targets inflation at just below 2%.

Meanwhile, the euro was modestly higher after it was slammed down by more than 1.5% in the prior session, hurt by the ECB’s decision to hold off on raising interest rates. After the ECB’s statement Thursday, there was speculation that the central bank could be shifting toward a rate hike in early to mid-2019, as it signaled it will wind down its €2.5 trillion ($2.95 trillion) program of bond buying, or quantitative easing.

The move comes after a busy week of central-bank news. On Wednesday, the Federal Reserve lifted its benchmark federal-funds rate by a quarter-percentage point and signaled it will raise rates four times in 2018. On Friday, the Bank of Japan left monetary policy steady, but investors were focused on its comments on consumer price inflation. The BOJ now sees CPI at a range of 0.5 to 1%, compared with around 1% in its April statement.

What strategists are saying

“With all of this week’s central bank event risk out of the way, we now turn to trade wars,” said Elsa Lignos, global head of FX strategy at RBC Capital Markets.

“This shouldn’t come as a surprise, given how well-flagged these tariffs have been—but many may have assumed Trump’s stance would soften given the positive reaction to the Kim summit—and confirmation that the tariffs are going ahead could still cause some risk aversion,” Lignos said in a note.

“With the ECB sounding cautious on inflation, the market took this as a dovish steer on future rate moves.…Essentially, the ECB is now formally beginning on its tightening path and this should help to support the euro in the medium to longer term,” said Richard Perry, market analyst at Hantec Markets.

“For now, the euro is under pressure, but once the dust settles it should begin to find support once more,” Perry said in a note

Stock movers

Among bank stocks, Spanish lender Bankia SA BKIA, +2.32% fell 2.9%, and Italian lender Banco BPM SpA BAMI, +7.01% gave up 1.9%. French bank Société Générale SA GLE, -1.33% lost 1.5% and Germany’s Deutsche Bank AG DBK, +1.02% lost 1.7%.

Indivior PLC shares INDV, +5.35% sank 27% after the U.S. Food and Drug Administration late Thursday said it approved the first generic version of a Suboxone under-the-tongue film used treat opioid addiction. Indivior is the maker of Suboxone.

Rolls-Royce Holdings PLC UK:RR rallied 7.6% after the British aircraft-engine maker said its planned job cuts should help it exceed a target of £1 billion in cash flow by 2020. Rolls-Royce on Thursday said it would cut 4,600 jobs over the next 24 months.

BTG PLC shares UK:BTG dropped 4.1% after the health-care company said an FDA panel voted against approving its Elevair Endobronchial Coil System for the treatment of people with severe emphysema.