* FTSEurofirst 300 index rises 0.6 percent
* UBS bounces in high volumes
* BNP Paribas, UniCredit fall on Italy downgrade worries
By Brian Gorman
LONDON, Sept 16 (Reuters) - European shares extended a rally to a fourth day on Friday, on optimism that policymakers may come up with a unified action plan to tackle the euro zone debt crisis at a finance ministers' meeting.
However, shares in French and Italian banks were down sharply, with some traders having cited expectations that credit rating agency Moody's Investors Services would cut Italy's debt rating after the market close.
BNP Paribas and Credit Agricole fell 7.6 and 11 percent respectively. UniCredit shed 7 percent.
The pan-European FTSEurofirst 300 index of top shares rose 0.6 percent to 937.85 points, its highest close in more than a week. Over the week, the index gained 2.4 percent, after hitting a 26-month low on Tuesday.
Trading volumes were much higher than normal, at 161 percent of the index's 90-day average, boosted by triple witching, with contracts for stock index futures, stock index options and stock options all expiring on the same day.
Swiss bank UBS was a standout gainer, up 5.2 percent, in volumes more than three times the 30-day average, after losing more than 10 percent on Thursday when it said it had lost $2 billion due to unauthorised trades.
"On balance we've had a decent week. And the markets have been taking the view that something positive might come out of the meeting in Poland," Mike Lenhoff, chief strategist and head of research at Brewin Dolphin Securities, in London, said.
"The markets have tested the lows, and said they're not prepared to go beyond them. We could see the market move ahead further."
U.S. Treasury Secretary Timothy Geithner was also attending the meeting in Poland, and he urged euro zone ministers there to leverage the 440 billion euro ($609 billion) bailout fund and free more resources to ease the debt crisis. He also said they should end "loose talk" about a euro zone break-up and work more closely with the European Central Bank to tackle the debt crisis.
But so far Germany and others have refused to bolster the fund, and some analysts were sceptical a permanent answer to the debt crisis could be hatched at the meeting.
Greece will likely default on its sovereign debt within a year after it exhausts the patience of its euro zone partners, but there is only a one-in-five chance it will leave the 17-nation euro zone as some in Germany have called for, a Reuters poll of economists showed on Friday.
Other stocks on the upside included autos , which rose 2 percent. European new car registrations increased 7.8 percent in August, data showed on Friday.
German heavyweights Daimler
But autos are down 19.7 percent in 2011. Banks are down 32.9 percent. The pan-European index is down 16.4 percent.
Investors have cut their exposure to risky assets such as stocks following an escalation of the euro zone debt crisis, and weak data from major economies that have sparked concern they may go back into recession.
On Friday, Britain's FTSE 100 rose 0.6 percent, Germany's DAX rose 1.2 percent and France's CAC40 fell 0.5 percent.
Italy's benchmark fell 0.7 percent.
RECESSION
Philip Isherwood, European equities strategist at Evolution Securities, said in a note that recession was already priced into equity markets, adding: "Many advise a flight to quality as a way to stay invested in these volatile markets, or as a way to re-enter these volatile markets."
He said "quality" sectors included tobacco and pharmaceuticals, as well as personal goods, household goods and food producers, but that these were now looking expensive as the "flight to quality" had already taken off.
Others advised caution even after this week's rally.
"I would not read anything into near-term market movements. I think they are going to remain extremely volatile and this will not go away until Germany makes up its mind," said Tom Elliot, global strategist at JP Morgan Asset Management.
"What we are seeing is a lining up of forces in favour of stronger fiscal union and those against. We have plenty of issues to keep volatility high and put off equity investors." ($1 = 0.722 Euros) (Additional reporting by Joanne Frearson; Editing by Jon Loades-Carter)
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