European shares hit two-week low as euro surges

* Euro zone STOXX index down 0.5 pct

* Materials biggest sectoral drag

* Michelin (Paris: FR0000121261 - news) gains on broker upgrade

* Reinsurers down on Hurricane Harvey

* Euro zone shares and the euro: https://goo.gl/aAuhgP (Updates prices.)

By Danilo Masoni and Helen Reid

MILAN/LONDON, Aug 28 (Reuters) - European shares fell on Monday as the euro strengthened after ECB chief Mario Draghi expressed no concern about a strong currency in a closely watched speech.

The STOXX index for euro zone stocks fell as much as 0.7 percent to a two-week low before paring its losses to end 0.4 percent lower on the day. London was closed for a holiday, reducing activity.

The export-oriented DAX fell 0.3 percent and the broader pan-European STOXX 600 index slipped 0.5 percent.

In a speech at a symposium of central bankers at Jackson Hole, Wyoming, Draghi did not try to talk down the euro, which climbed to its highest in more than two years against the dollar .

"The Jackson Hole meeting has been explosive for the euro and the U.S. dollar traders," London Capital Group analyst Ipek Ozkardeskaya said in a note.

Euro zone shares reached their highest in more than two years in May, as strong macro data and company results drew investors. But the recent surge in the euro has weighed on stocks.

Almost all sectors suffered losses on Monday with materials and construction stocks the biggest drag to the region's equities.

Finnish paper makers Stora Enso (LSE: 0CX9.L - news) and UPM (Taiwan OTC: 4752.TWO - news) -Kymmene fell 3.7 to 5.1 percent after a report that Danske Bank (LSE: 0NVC.L - news) downgraded them, citing a weaker dollar, higher input costs and lower prices of paper mass.

Reinsurance stocks suffered after flooding triggered by Tropical Storm Harvey devastated Houston. Shares (Berlin: DI6.BE - news) in Hannover Re were fell 1.3 percent and Munich Re 0.9 percent. French reinsurer Scor dropped 1.5 percent.

Shares in German drugmaker Stada suffered some selling, down 3.6 percent, as investors took profits after the stock surged to an all-time high on Friday when hedge fund Elliott increased its stake in the company.

Dutch supermarket group Ahold Delhaize stumbled again, down 2.6 percent after sharp losses on Friday when Amazon's plans to cut prices at Whole Foods Market (NasdaqGS: WFM - news) dented retailer stocks.

Broker Raymond James cut its target price on Ahold to factor in "growing competitive risk" from the merger.

Among the very few gainers were shares in tyre maker Michelin, which gained 1.5 percent after Oddo BHF analysts raised the stock to a "buy", saying a pick-up in agricultural and mining sectors would benefit the firm's specialty tyre business.

For Reuters Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets

(Reporting by Danilo Masoni, editing by Larry King)