* FTSEurofirst 300 up 0.7 pct, U.S. data provides lift
* GSK, Hexagon rally after positive results
* Spanish news agency says 11 EU banks to fail stress test (Adds closing prices with no other changes to text)
By Alistair Smout
EDINBURGH, Oct 22 (Reuters) - European shares nudged higher on Wednesday, supported by a raft of positive corporate earnings and mild inflation data from the United States which may encourage the U.S. Federal Reserve to keep interest rates lower for longer.
However, the session was volatile, with euro zone banks under pressure early on after Spain's EFE news agency reported that several European lenders might fail EU bank stress tests.
The pan-European FTSEurofirst 300 closed up 0.7 percent at 1,308.73, regaining the ground lost after the stress-test report came out.
U.S. consumer prices rose marginally in September, painting a weak inflation picture that should give the Federal Reserve ample room to keep interest rates low for a while longer.
Also on the upside, GlaxSmithKline rose 2.6 percent after beating earnings expectations and saying it expected a vaccine against Ebola to be ready later this year.
"Revenues are a miss but a potential Ebola-tackling drug could help to reverse that disappointment if it proves to be successful. The pipeline still looks attractive," IG market analyst Alastair McCaig said.
Measurement technology and software group Hexagon surged 10.3 percent after posting third-quarter pretax profit above expectations, saying like-for-like sales growth had strengthened from the previous quarter.
So far in Europe's earnings season, 9 percent of STOXX 600 companies have reported results, of which 65 percent have met or beaten profit forecasts, according to data from Thomson Reuters StarMine.
However, British American Tobacco fell 2.6 percent, taking the most points off the FTSEurofirst 300, after reporting an accelerated decline in the number of cigarettes sold, citing economic pressures on smokers worldwide to rein in spending.
Heineken also fell after results, dropping 1 percent as the world's No. 3 brewer reported lower-than-expected beer sales in the third quarter.
Euro zone banks recovered to trade slightly higher despite falling more than 1 percent after EFE's report that at least 11 banks from six European countries are set to fail the region-wide financial health check this weekend, citing unidentified sources.
Spain's economy minister said he was confident Spanish lenders would do well in the European Central Bank's checks, and Austria's Erste Bank denied it was among those that had failed the test.
Erste Bank closed down 0.9 percent, having traded as much as 2.3 percent lower.
The ECB sought to cool speculation. "Any inferences drawn as to the final outcome of the exercise would be highly speculative until the results are final on 26 October," said a spokesman.
The issue "does underline the fragility of the European economy because if you don't have secure, robust banking institutions in place, (the economy) just won't be able to grow," Redmayne-Bentley investment manager David Battersby said.
Europe bourses in 2014: link.reuters.com/pap87v
Asset performance in 2014: link.reuters.com/gap87v
Today's European research round-up (Additional reporting by Atul Prakash in London; Editing by Tom Heneghan)