* FTSEurofirst 300 ends down 0.7 pct; up 1 pct on week
* Early losses pared as Fed leaves door to QE3 open
* Banks, insurers among hardest hit
By Simon Jessop
LONDON, Aug 26 (Reuters) - European shares ended lower on Friday after U.S. Fed Chairman Ben Bernanke announced no fresh measures to boost sluggish growth in the world's largest economy, although they managed to eke out a small weekly gain and snap a four-week losing streak.
After a volatile week's trade, in which a three-day short-covering rally gave way to two sessions of falls as hopes for a third round of U.S quantitative easing dimmed, the market sold off heavily after Bernanke's speech before paring losses.
"The initial reaction was overdone," a London-based portfolio trader at a leading U.S. investment bank said, while economists at Societe Generale said the decision to extend a September Fed meeting could lend support to some.
"Those looking for upside surprises may hang their hopes on the fact that the Fed is extending the September 20 meeting to two days in order to discuss further easing options in more detail. This opens the door to a potential new announcement on September 21," they said in a note.
The head of the Organisation for Economic Co-operation and Development, Angel Gurria, described Bernanke's speech as "very sober and very sobering message," in an interview with Reuters Insider.
While the lack of a move to QE3 was "always going to take the market down", Philip Isherwood, head of equity strategy at Evolution Securities, said, some weak economic data, including Friday's downwards revision of U.S. second-quarter growth, meant it could not be ruled out.
The FTSEurofirst 300 ended the day down 0.7 percent at 919.03 points in volume at 89 percent of its 90-day daily average, chalking up a 1 percent gain for the week after falling 19 percent in the previous four.
Banks and insurers , particularly those not covered by the region's piecemeal short-selling ban, were once again among the hardest hit by the broad market selloff into what is a three-day holiday weekend for UK investors.
Royal Bank of Scotland and Lloyds Banking Group both fell more than 4 percent, while insurer Aviva ended down 2.3 percent.
Standout faller across the index, however, was National Bank
of Greece
Adding to the sector's woes was a rise in the 2-year Greek bond yield to a fresh euro-era high coupled with a rise in the cost of insuring the debt against default, as political wrangling over the use of collateral in a second Greek bailout raged on.
The risk of systemic problems associated with the euro zone sovereign debt crisis were still real, Patrick Moonen, senior equity strategist at ING Investment Management, said, and as such they continued to remain very cautious on equities.
Forecasting no corporate earnings growth in 2012 "even if we escape a recession", Moonen said his equity picks were weighted towards defensive sectors including pharmaceuticals and consumer staples.
(Editing by Erica Billingham)
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