* STOXX 600 down 0.1 pct
* Banks fall as investors exit most risky assets
* Positive outlook boosts H&M
* PostNL jumps on GS upgrade
* Downgrades weigh on Grifols, Carnival, Maersk (ADVISORY- Follow European and UK stock markets in real time on the Reuters Live Markets blog on Eikon - see cpurl://apps.cp./cms/?pageId=livemarkets)
LONDON, Sept 15 (Reuters) - European shares dipped on Friday as another missile launch by North Korea softened appetite for riskier banking and mining stocks but remained on track for their strongest week since July, with investors increasingly ignoring geopolitical turmoil.
The pan-European STOXX 600 dipped 0.1 percent as investors followed Asia's lead with a more muted reaction to the latest flare-up of tensions on the Korean peninsula.
Euro zone stocks fell 0.2 percent, while Britain's FTSE dropped 0.4 percent to a new four-month low.
Banks fell 0.6 percent, showing strain as investors shed the most risky assets, buying defensive sectors such as utilities and real estate instead. Miners sank 0.8 percent.
But European stocks were still headed for their strongest week in two months, having hit a five-week high on Thursday as they recovered from a summer dip. Investors and analysts said attractive valuations capped losses for the region's equities.
"North Korea had little impact on markets," said Valentin Bissat, equity strategist at Mirabaud Asset Management, which upgraded its exposure to European stocks on Monday.
"European equities continue to benefit from solid growth, and U.S. investors also continue to be invested in European equities with more interesting valuation and the positive FX exchange rate that magnifies returns in USD."
Broker rating changes moved some of the top gainers and losers.
Pharma company Grifols dropped 3.9 percent to the bottom of the STOXX as Kepler Cheuvreux analysts said a recovery in margins could take longer than expected, removing the stock from their Iberian top picks.
They pointed to the weaker dollar weighing on Grifols, which like many European healthcare companies is highly exposed to the United States.
Goldman Sachs strategists downgraded the sector to neutral last week citing its sensitivity to U.S. policies.
Cruise provider Carnival dropped 2.6 percent after Credit Suisse cut its rating to "neutral", citing increasing threats to demand in the top three cruise markets: the Caribbean, Mediterranean and China.
Moeller-Maersk fell 2.4 percent after BAML downgraded it to "underperform".
Top gainer was PostNL, up 3.9 percent after Goldman Sachs upgraded the Dutch postal services firm to a buy after recent share price weakness.
H&M shares rose 2.6 percent, helping the retail sector outperform for the second day, after the world's second largest clothing retailer said autumn sales had started well, though large mark-downs capped its third-quarter sales at 5 percent.
Goldman Sachs strategists said European stocks continue to attract investors concerned about rich valuations elsewhere, with strong inflows from international and European investors.
Euro zone stocks have outperformed the broader STOXX index year-to-date despite analysts and investors predicting the stronger euro may dent company earnings.
(Reporting by Helen Reid, Editing by Kit Rees and Jon Boyle)