(For a Reuters live blog on U.S., UK and European stock markets, click or type LIVE/ in a news window)
* STOXX 600 off 0.3%, down 1.9% for the week
* France's services sector contracts sharply in Sept - flash PMI
* AstraZeneca rises as breast cancer drug meets goal in study
* Shrinking German business activity points to Q3 contraction - PMI
Sept 22 (Reuters) - European shares closed lower on Friday, logging sharp weekly losses as investors grappled with the prospects of global interest rates remaining elevated for longer.
The pan-European STOXX 600 index fell 0.3%, touching its lowest in more than a week, with the construction and materials sector amongst top decliners, down 1.0%.
Europe's benchmark stock index notched a weekly decline of 1.9% as investors turned risk averse after major central banks across the world, including the U.S. Federal Reserve and the Bank of England, hinted at keeping borrowing costs high for longer than expected. Jitters about an economic downturn in the euro zone persisted after preliminary data showed a contraction in economic activity in France and Germany, while a reading of the broader bloc showed the continental economy is likely to contract this quarter and won't return to growth anytime soon.
"Clearly, the medicine is working ... higher rates are starting to feed through to the economy," economists at HSBC said in a note.
"With limited fears of a recession - at least of a major one - and resurgent energy prices, we think that for now the European Central Bank will remain more focused on tackling inflation, maintaining its hawkish bias."
In the United Kingdom, official figures showed British retail sales partially recovered in August after a rainy July washout, while a separate reading showed the economy displayed clear recession signals.
Euro zone banks dipped 1.4% as Dutch banks ING Groep and ABN AMRO fell 6.4% and 4.5%, respectively, after Dutch lawmakers backed a higher tax on banks to cover an increase of the minimum wage and larger childcare support in 2024.
Helping limit losses, energy and mining firms rose 0.3% each, tracking rising commodity prices.
Technology stocks added 0.8% on Friday, though they logged a weekly decline of close to 2%.
Meanwhile, Spain's gross domestic product grew 0.5% in the second quarter, the National Statistics Institute said, as it revised its July estimate up from 0.4% growth.
Among individual stocks, AstraZeneca gained 1.5% after the London-listed drugmaker said its experimental precision drug had slowed the progression of breast cancer in a late-stage trial.
Shares of eBay-backed online classifieds group Adevinta jumped 26.5% after the Norwegian company said it had received a takeover proposal from a consortium led by Permira and Blackstone.
(Reporting by Bansari Mayur Kamdar and Shashwat Chauhan in Bengaluru; Editing by Sherry Jacob-Phillips, Sohini Goswami and Emelia Sithole-Matarise)