Oct 20 (Reuters) - European shares fell on Friday and were set to post their biggest weekly loss in three months as mounting fears about a wider Middle East conflict, surging government bond yields, and underwhelming earnings reports keep investors risk-averse.

The pan-European STOXX 600 was down 0.9% by 7:06 GMT to its lowest in seven months, tracking a weak finish on Wall Street overnight.

The index is down 3% for the week as the Middle East turmoil could further add to the risk-averse mood, driven by expectations of higher-for-longer interest rates.

L'Oreal reported a brisk rise in third-quarter sales, lifted by growth in Europe, but missed expectations for a strong rebound in China. Shares of the French cosmetics company fell nearly 3%.

Swedish garden equipment maker Husqvarna slipped 6.6% after third-quarter revenue missed expectations.

Declines in both stocks dragged Europe's household goods index 1.2% lower, while rate-sensitive technology shares led declines on the benchmark, down 1.5%. On the upside, Sika gained 2% after the chemicals firm reported a 5.6% increase in sales for the first nine months of 2023. (Reporting by Amruta Khandekar; Editing by Sonia Cheema)