* FTSEurofirst 300 index rises 0.2 percent
* UK banks gain after stress test results
* Linde slumps after cutting medium-term targets
By Atul Prakash
LONDON, Dec 1 (Reuters) - European shares edged higher on Tuesday, with UK-listed banks gaining after none failed the latest Bank of England "stress tests" on the sector.
Standard Chartered, Lloyds Group, Royal Bank of Scotland, HSBC and Barclays rose 1.4 to 2.7 percent, helping the European banking index gain more than 1 percent, after the BoE said major UK lenders did not have to take any action.
The BoE found capital ratios are not far from what's needed in the longer term, potentially opening the way for higher dividends.
"The BoE UK bank stress test results suggest the central bank will ease capital pressures on the sector after years of post-crisis reform," Augustin Eden, analyst at Accendo Markets, said. "While RBS and Standard Chartered failed aspects of the balance sheet analysis exercise, they already have plans in place to hit targets."
The pan-European FTSEurofirst 300 index was up 0.2 percent at 1,521.64 points by 0852 GMT, also supported by a rise of 0.7 percent in the STOXX 600 Basic Resources index as metals prices rose on the back of a weaker dollar.
The market shrugged off data showing activity in China's manufacturing sector contracted more than expected in November.
"Overall sentiment remains bullish," Markus Huber, senior analyst at Peregrine & Black, said.
"However in light of this week's crucial ECB meeting, Fed chief Yellen testifying on Capitol Hill and Friday's U.S. non-farm payroll, it wouldn't come as too much of a surprise if investors, instead of typically pouring additional new money into stocks at the beginning of a new month, might hold off until next week."
Shares in TUI Group rose 3.3 percent after its largest shareholder, Alexei Mordashov, increased his stake in the European travel and tourism group to 15.02 percent from about 13 percent.
On the downside, Linde fell 11 percent after the world's biggest industrial gases company by sales cut its 2017 profit target, citing slower industrial production growth weighing on its industrial gases unit.
However, Helvea Baader analysts said the sharp negative share price reaction might be a good entry point.
"We think that Linde's cash flow should nevertheless improve further over the coming years and that Linde's consolidation story is on track," they said in a note. (Editing by David Holmes)