UPDATE 1-European shares edge up led by Shell, Ocado rally

* STOXX 600 rises 0.3 pct

* BOE stress tests support UK banks

Ocado strikes deal with France's Casino

* SocGen rises after unveiling 3-year plan (Adds stocks, comments)

By Danilo Masoni and Julien Ponthus

MILAN/LONDON, Nov 28 (Reuters) - European shares were supported on Tuesday by gains in heavyweight Royal Dutch Shell after the oil major canceled an austerity dividend, while Ocado rallied following a deal with French supermarket Casino.

Ocado shares jumped 19 percent after Casino signed a deal with the British online retailer to use its grocery e-commerce platform to develop its online business.

"This is a great deal for Ocado," Bernstein commented, cautioning however that "the Ocado share price requires one big deal per year for the foreseeable future and we don't believe there is sufficient deal potential for this."

Shell rose 2.7 percent, helping send the pan-European STOXX 600 index up 0.3 percent by 0930 GMT and the oil and gas index, up 1 percent, the biggest sectoral gainer in Europe.

Shell canceled an austerity dividend policy as the oil and gas company boosted its cash generation forecasts, drawing a line under three years of oil price turmoil.

UK's FTSE 350 bank index rose 0.2 percent in relief after a Bank of England stress test delivered no negative surprises, while Britain's FTSE index added 0.3 percent.

"Overall, the results show that there are pockets of problems in the sector but that the banks are broadly ticking all of the right stress test boxes," Aberdeen Standard Investments commented, noting however that "Brexit is the key risk today for the UK banking system."

Still in the banking sector, France's SocGen was up 0.8 percent after it unveiled a three-year plan to cut costs and raise dividends.

"We don't expect the stock to outperform the sector in the short term," Jefferies said in a note, arguing that the plan will have a one-off negative impact on the fourth quarter of 2017 and that investors are still waiting for current litigation, notably with the U.S., to come to an end.

Swiss speciality chemicals maker Clariant was up 0.3 percent as activist investor White Tale said it would take its demands directly to shareholders after the group snubbed its request for an independent strategic review and three seats on its board of directors.

Dual-headed, Anglo-Dutch consumer goods maker Unilever was up 1.4 percent after it said a single corporate structure was in its best interests and that of its shareholders but had yet to make a decision.

Top STOXX 600 faller was UDG Healthcare, down over 4 percent after reporting a mixed set of results and the retirement of its CFO Alan Ralph.

CHR Hansen fell 3.8 percent after the resignation of its CEO and Dixons retreated 2.7 percent after Siftel downgraded the stock to hold.

Telecoms and cable group Altice continued its downward spiral, losing 2.8 percent, bringing its total slide for November to over 55 percent.

"We still do not see Altice stock as attractive versus European peers," Barclays said, cutting its target price to 9 euros. (Reporting by Danilo Masoni; Editing by Julien Ponthus and Raissa Kasolowsky)