European shares were flat on Friday, set for a modest weekly loss as a mixed batch of corporate earnings left the benchmark index floundering for a clear direction.

The pan-European STOXX 600 index was flat at 508.9 points by 0710 GMT and was set to log its second consecutive week of losses after it hit its lowest over two months in the previous session.

Mercedes-Benz dropped 2.2% after the German luxury automaker narrowed its annual forecast for the profit margin in its core car division.

The stock dragged the auto sector that lost 1.1%.

Capgemini lost 6.1% after the French IT consulting group expects its annual revenue to fall compared with the earlier expectation of at least maintaining stable growth.

On the flip side, NatWest gained 8% after the British bank said it would buy Metro Bank's mortgage portfolio for 2.4 billion pounds.

Hermes gained 2% after the Birkin-bag maker reported a 13% rise in second-quarter sales, demonstrating the continued appetite from wealthy shoppers for its luxury handbags.

EssilorLuxottica gained 6.4% after the eyewear maker's revenue rose 5.2% in the second quarter, supported by the Europe, Middle East and Africa (EMEA) region.

(Reporting by Pranav Kashyap in Bengaluru; Editing by Nivedita Bhattacharjee)