• The rapid spread of Covid-19 is once again front and center in Europe, with multiple countries seeing record daily cases.
• ECB President Lagarde said the bank should not look to tighten monetary policy as it could hamper the region's recovery.
• Austria's ATX index suffered its worst day in more than a year following news the country will re-enter a full national lockdown.

LONDON — European markets closed lower on Friday, with investors rattled as countries impose strict measures to tackle the latest wave of Covid-19 infections.

The pan-European Stoxx 600 closed down by 0.3%, having started the day on a positive note. Europe's banking index was among the worst performers, plunging 2.3% following comments from European Central Bank President Christine Lagarde.

The rapid spread of Covid in Europe is once again front and center, with multiple countries experiencing record daily caseloads, imposing partial lockdowns and tightening rules on the unvaccinated.

Germany on Thursday announced more restrictions for unvaccinated people as a fourth wave sent cases to a record, before Austria announced Friday that it will re-enter a full national lockdown.

Austria's ATX index plunged 3.1%, suffering its worst day in more than a year.

Stateside, stocks were mixed following the announcement out of Austria.

Back in Europe, ECB President Lagarde on Friday reinforced her view that euro zone inflation will fade, and said the ECB should not look to tighten monetary policy as it could hamper the bloc's recovery.

As well as taking some of the wind out of the stock market's sails, Lagarde's comments and the news of new Covid restrictions dented the euro gave up 0.5% to the dollar.

On the data front, U.K. retail sales increased 0.8% month-on-month in October, slightly exceeding the 0.5% expected by economists in a Reuters poll. Excluding fuel, sales grew by 1.6% on the month against a 0.6% forecast, with the country facing spiking energy prices.

Investors were also monitoring the latter stages of corporate earnings season, with Kingfisher among those reporting on Friday.

The British retailer posted a 2.4% slide in third-quarter sales but said the final quarter of the year was off to a strong start. Kingfisher shares fell 4.6%.

Shares of British online grocer Ocado climbed 6.8% following news of fresh Covid-19 restrictions in Europe. Online supermarkets and food delivery companies advanced across the board.

Meanwhile the news sent British Airways parent IAG and airplane engine manufacturer Rolls-Royce tumbling almost 4% amid a broad decline for travel stocks.

In the banking sector, Deutsche Bank fell 4.9% following Lagarde's interest rate remarks.

At the top of the Stoxx 600, British e-commerce company THG jumped 8.8%. It comes after a Sky News report on Wednesday which said investment bank Numis retracted allegations about accounting irregularities at THG.

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- CNBC's Ryan Browne contributed to this report.