UPDATE 1-European stocks set for worst week since Feb on inflation anxiety

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* Banks, retailers lead early gains
* Danone slips after Goldman downgrade
* U.S. retail sales, ECB minutes awaited

(Adds comment, updates prices)
May 14 (Reuters) - European stocks edged higher on Friday,
but were on course for their biggest weekly drop since
February-end as investors maintained a cautious stance amid U.S.
inflation scare.
The pan-European STOXX 600 index .STOXX rose 0.3%, with
banks .SX7P and retail .SXRP stocks leading the gains.
The benchmark was on course for a 1.4% weekly drop as a
rally in commodity prices and signs of quickening U.S. inflation
raised fears about an earlier-than-expected interest rate hike
by the U.S. Federal Reserve.
Investors will be watching U.S. retail sales and industrial
production data due later in the day to gauge whether the
inflationary pressures are short-lived, as seen by Fed
policymakers.
"Either the U.S. inflation uptick is temporary, or the Fed
is dangerously complacent. Either way, we're going to see
tolerance of higher inflation tested further in the months
ahead," Kit Juckes, a strategist at Societe Generale wrote in a
note.
Bank of America's weekly fund flow statistics showed that
investors pulled out of tech equity funds and loaded up on
inflation protection in the week ended May 12. While price rises are less of a problem in the euro zone,
investors will be watching the European Central Bank's minutes
of its latest policy meeting, to be released later in the day,
to get clues on the tapering of its bond purchase scheme.
Among individual stocks, Italy's Banco BPM BAMI.MI rose
2.4% after Deutsche Bank upgraded the stock to "buy", saying the
lender's "speculative appeal" could increase in the next few
months.
French food group Danone DANO.PA slipped 2% after Goldman
Sachs downgraded the stock to "sell", citing weaker demographic
trends, particularly in China, will weigh on its specialised
nutrition business. Atlantia ATL.MI slipped 1.8% after the Italian
infrastructure group reported a net loss in the first quarter
and confirmed it would decide on the sale of its stake in
motorway unit Autostrade by June 11.