* Pan-European STOXX 600 index up 0.2 percent
* Banks down 0.2 percent after positive open
* Autos lead sectoral gainers after France sales data
* Prosiebensat, Telefonica Deutschland slip after broker moves
By Danilo Masoni
MILAN, July 1 (Reuters) - European shares edged up in choppy trade on Friday as investors pondered possible measures the European Central Bank could put in place to ease worries about the fallout from Britain's vote to leave the European Union.
The pan-European STOXX 600 index rose 0.2 percent by 0837 GMT, while the FTSEurofirst 300 added 0.5 percent, both having fluctuated in and out of positive territory earlier in the session.
Talk of a possible looseing of rules for the ECB's bond buying programme sent Italian and Spanish borrowing costs sharply lower, initially boosting shares of banks from those countries which are among the most exposed in Europe to sovereign debt.
However, stocks came off highs after a central bank governing council member denied any immediate plans to do so.
"This (denial) still leaves a fair bit of wiggle room in terms of communication and is not as hawkish as first read of headline would suggest," Deutsche Bank said in a note to clients.
With the exception of UK's FTSE 100 index, European shares remain below levels reached before the shock UK vote last week, which triggered worries about political risk in Europe, weighing the most on peripheral countries and financial stocks.
In the first two days after the UK vote investors sold European shares on concerns of a possible break up of the European Union but hopes of more central bank stimulus had later pushed the region's stocks higher.
The bank index, which has been the most hit during the Brexit sell-off, also turned lower on Friday and was down 0.2 percent with Italian banks leading the reversal.
UniCredit, down 2 percent, was among the top losers on the FTSEurofirst. Elsewhere in the sector Lloyds and Intesa Sanpaolo were flat, while Deutsche Bank rose 1 percent after hitting record lows in the previous session.
Among the biggest losers, German TV company Prosiebensat.1 fell 3.9 percent after HSBC cuts its price target on the stock, while Telefonica Deutschland also fell more than 3 percent after a Credit Suisse downgrade.
Europe's car sector index rose 2.3 percent, making it the biggest sectoral gainer as data showed that sales of new cars in France rose in June. (Reporting by Danilo Masoni; Editing by Toby Chopra)