European shares extended losses to a fourth session on Friday, as market participants braced for May U.S. inflation data that could guide the Federal Reserve's policy decision next week.

All sectors were trading well in negative territory, with banks weighing the most on the pan-European STOXX 600 index, which lost 1.3%. The index was on course to end the week about 2.5% lower - its sharpest decline since early May.

Concerns also mounted about demand and growth in China, the world's second-largest economy, after Shanghai and Beijing went back on fresh COVID-19 alerts on Thursday and imposed new lockdown restrictions.

The U.S. Labor Department's Consumer Price Index was expected to have accelerated to 0.7% last month from 0.3% in April. But when stripped of volatile food and energy products, it was seen cooling a nominal 0.1 percentage point to 0.5%.

The data is due at 1230 GMT, and bets have grown that the Fed will increase beyond the two 50-basis point hikes it plans for next week and July.

"Consensus estimates for U.S. CPI release, with risks skewed to the upside, have raised worries about the Federal Reserve's ability to bring inflation under control while avoiding a recession," said Mark Haefele, chief investment officer at UBS Global Wealth Management.

Equities were hammered on Thursday after the European Central Bank said it would deliver next month its first interest rate hike since 2011, and a potentially larger move in September.

Investors pulled out money from European equity funds in the week to Wednesday, marking the 17th consecutive week of outflows, due to uncertainties related to the Russia-Ukraine war, BofA said.

Among individual stocks, GSK rose 1.4% after the drugmaker said its vaccine for respiratory syncytial virus was successful in a late-stage trial involving older adults.

Regional airlines fell as carriers and airports clamour to find more workers, minimise cancelled flights and reduce delays for passengers amid labour strife in Europe driving expectations of more travel headaches during the busy summer season.

Ryanair, International Consolidated Airlines , Lufthansa and Wizz Air dropped between 1.2% and 3.6%.

Credit Suisse fell another 4.5% after State Street Corp said it was not looking to buy the Swiss bank. A report of a deal between the two lenders had sent Credit Suisse shares surging from near 20-year lows earlier this week.

(Reporting by Susan Mathew in Bengaluru; Editing by Sherry Jacob-Phillips and Subhranshu Sahu)