* STOXX 600 up 0.2 pct
* Nokia jumps after settles dispute with Apple
* Upgrade boosts Banco BPM
* Spanish banks recover (Recasts, adds quotes and detail, updates prices)
By Kit Rees
LONDON, May 23 (Reuters) - Nokia shares jumped more than 6 percent on Tuesday to their highest levels in more than a year, joined by a rise in banking stocks which helped European stock markets edge higher.
The pan-European STOXX 600 index rose 0.2 percent, gaining pace after a sluggish opening as banking stocks headed higher. Germany's DAX was up 0.3 percent while euro zone blue chips gained 0.6 percent.
European tech firms were standout performers, with the sector up more than 1 percent after shares in Nokia jumped 6.7 percent to their highest level since February 2016 following the settlement of a patent dispute with Apple.
Positive economic data also supported sentiment, with PMI surveys for May showing that businesses across the euro zone kept up April's impressive growth rate.
"It's a kind of risk-on environment, and Europe's benefits - relatively low currency, a relatively attractive valuation against the United States and many other regions, and of course being a developed market - should enable it to continue to outperform," Ken Odeluga, market analyst at City Index, said.
Upgrades also helped the top STOXX gainers, with Banco BPM rising 4 percent after Barclays upgraded the Italian lender to "overweight" from "equal weight".
Analysts at Barclays cited Banco BPM's attractive valuation compared to Italian peers as well as progress with its portfolio of bad loans.
"Banco BPM has much work to do reducing its NPLs and also raising its coverage ... yet management has made a good start in 1Q17," analysts at Barclays said in a note, referring to Banco BPM's non-performing loans.
Overall banking stocks gained more than 1 percent, with shares in Spanish banks Banco de Sabadell, Santander and BBVA regaining losses from the previous session when they were hit by political worries after Spain's Socialists re-elected hardliner Pedro Sanchez.
Spain's IBEX gained 0.8 percent.
Basic resources shares retreated. BHP Billiton and Glencore fell as the price of copper edged lower, while precious metals miners Polymetal and Randgold Resources were also weaker as the gold price steadied.
In the UK, the FTSE 100 was up 0.2 percent, hovering close to record highs, as a weaker sterling continued to underpin gains in the exporter-heavy index.
Campaigning ahead of the June 8 general election was suspended after at least 22 people, including some children, were killed in a suicide attack in Manchester overnight.
There was little direct market impact seen from the attack, although shares of theme park operator Merlin Entertainments were off around 1 percent and the top losers on the FTSE. (Editing by Vikram Subhedar and Ed Osmond)