European shares retreat on Ukraine tension
* FTSEurofirst 300 down 0.3 pct, Euro STOXX 50 down 0.8 pct
* Ukraine concerns unleash volatility into market
* Traders point to dovish tone in Yellen speech
* Euro STOXX 50 halted by 200-day moving average
By Tricia Wright
LONDON, Aug 22 (Reuters) - European shares fell on Friday after a brisk two-week rally, hurt by a ratcheting-up of tensions in Ukraine, although traders said a dovish tone in a speech by U.S. Federal Reserve Chair Janet Yellen limited losses.
Souring the mood, Ukraine declared that Russia had launched a "direct invasion" of its territory after Moscow sent a convoy of aid trucks across the border into eastern Ukraine where pro-Russian rebels are fighting government forces.
But the FTSEurofirst, which fell as much as 0.7 percent in a choppy day of trade, managed to recover some of its poise to end the session down 0.3 percent at 1,351.38 points.
In a defence of her policy approach, Yellen, at a central banking conference in Jackson Hole, Wyoming, said that U.S. job markets remain hampered by the effects of the Great Recession and the Fed should move cautiously in determining when interest rates should rise.
It was these comments that were behind a brief spike by the market into positive territory, traders said.
"Yellen's speech showed she's still unsure about some of the data we're getting, and as a result she could hold off from raising rates," Central Markets trading analyst Joe Neighbour said.
Despite Friday's overall weakness, the FTSEurofirst recorded its biggest weekly gain in six months - up 2.1 percent.
The index has risen more than 4 percent since a low hit two weeks ago, regaining ground following a sell-off triggered in June by the worries over the crisis in Ukraine.
But even after the sharp two-week rally, the index is still down more than 3 percent from the 5-1/2 year high hit in June.
"European indexes are halted by big resistance levels. At this point, investors should think about hedging their portfolios," Aurel BGC chartist Gerard Sagnier said.
The euro zone's blue-chip Euro STOXX 50 index was down 0.8 percent at 3,098.50 points. In the first minutes of trading, the index tested a key resistance level representing its 200-day moving average, before falling back.
Europe bourses in 2014: link.reuters.com/pap87v
Asset performance in 2014: link.reuters.com/gap87v
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