* FTSEurofirst 300 down 0.5 pct
* Index stabilises following China-led August rout
* E.ON falls on broker downgrades after it drops nuclear spin-off
* Actelion drops after initiating discussions with ZS Pharma
By Alistair Smout
LONDON, Sept 11 (Reuters) - A top European share index was set for its biggest weekly rise since July despite edging lower on Friday, with drops in Germany's E.ON and Swiss pharmaceutical firm Actelion taking the shine off the week's rally.
The pan-European FTSEurofirst 300 is up 1.1 percent so far this week, set for its biggest weekly rise in around 2 months despite falling 0.5 percent to 1,408.27 by 0748 GMT points on Friday.
Global stock markets had been under pressure in recent weeks, with serious concerns about the strength of China's growth roiling markets in August.
However, markets have stabilised after China's regulators intervened in its stock market, with some investors also betting that the recent uncertainty would dissuade the Federal Reserve from raising interest rates next week.
After the recent rally, some were cautious heading into the new week, even if many investors believed the August sell-off had been overdone.
"We're going through quite a fragile time, and we'll have to see how it evolves from here. That will depend on Fed action, as well as whether there's further negative news from China," said Veronika Pechlaner, European equity fund manager at Asburton.
"We've had a bounce, and after a correction as steep as the one we've had, the rally needs testing... This is not the time to make huge bets either way, but longer term we remain constructive on equities."
Top faller was Germany's biggest utility E.ON, down 2.6 percent, extending the previous session's fall following broker downgrades.
Its shares dropped 5 percent to a 20 year low on Thursday after it abandoned plans to spin off its German nuclear power plants, bowing to political pressure to retain liability for billions of euros of decommissioning costs when they are shut down.
"We see this as a clear negative to our previously positive investment case... it appears the politicians have got the better of E.ON," analysts at RBC said in a note, downgrading the stock to "sector perform" from "outperfom".
"In our view, the previously promised new E.ON, which was meant to be highly regulated and network & customer focused, will be little improved on the current business and will not be the company that many investors were hoping for."
Switzerland-based drugmaker Actelion fell 2.4 percent after it said it had initiated preliminary discussions with U.S. biotech company ZS Pharma.
Analysts at HSBC said that there was a risk that the bid by Actelion would destroy value for its shareholders.
Europe bourses in 2015: link.reuters.com/pap87v
Asset performance in 2015: link.reuters.com/gap87v
Today's European research round-up
Editing by Dominic Evans