Britain's FTSE supported by Shell, bank test relief

* FTSE up 0.4 pct

* Shell (LSE: RDSB.L - news) surges after return to full dividend

* Banking stocks index rises after stress test results

* Ocado soars 28 pct after "transformative" deal

By Danilo Masoni

MILAN, Nov 28 (Reuters) - The UK's top share index rose on Tuesday as oil heavyweight Royal Dutch Shell (LSE: 0LN9.L - news) surged after a solid earnings update and a Bank of England stress test on banks delivered no nasty shocks.

A rally of more than 20 percent in Ocado following an "transformative" deal with French supermarket Casino livened up the session for the country's mid cap stocks.

The FTSE 100 index added 0.4 percent by 0920 GMT, with stronger energy and financial stocks more than offseting weakness among commodity stocks due to worries over demand from top metal consumer China.

Shell rose 3 percent, leading gainers on the FTSE. The oil and gas major cancelled an austerity dividend policy and boosted its cash generation forecasts, drawing a line under three years of oil price turmoil.

UK's FTSE 350 bank index rose 0.4 percent. After carrying out its annual health check on lenders, the Bank of England said banks could cope with a "disorderly" Brexit without needing to curb lending or to be bailed out by taxpayers.

It said that for the first time since it started 'stress-testing' banks in 2014, none of Britain's major lenders would need to raise extra capital.

"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," said Laurent Frings, Global Head of Credit Research at Aberdeen Standard Investments.

"They are now much better capitalised and more heavily scrutinised by the regulator than before the crisis," he added.

At a single stock level banks showed mixed performances.

Among banks that passed the test without reservations, HSBC rose 0.9 percent and Standard Chartered (BSE: 580001.BO - news) added 0.3 percent but Lloyds fell 0.8 percent.

Barclays (LSE: BARC.L - news) was down 0.9 percent and Royal Bank of Scotland added 0.2 percent.

Falls in mining stocks on worries over China capped gains on the broader market. Shares (Berlin: DI6.BE - news) in Glencore (Frankfurt: 8GC.F - news) , BHP Billiton (NYSE: BBL - news) and Anglo American (LSE: AAL.L - news) were all down by more than 1 percent, leading the losses on the FTSE.

Ocado rose as much as 28 percent, leading gainers on the mid cap index which added 0.2 percent.

French supermarket Casino signed a deal with Ocado to use the British online retailer's grocery e-commerce platform to develop its online business, starting with Monoprix.fr.

"This is a transformative deal for Ocado as not only will it expose the firm to a large chunk of the French market, it could also be the launch pad for many more international partnerships," said Neil Wilson, market analyst at ETX Capital.

Elsewhere among mid caps, Pets at Home (Frankfurt: A1XFE7 - news) fell 9 percent following results and news that its CEO Ian Kellett will step down and will be replaced by the head of the company's retail business, Peter Pritchard. (Reporting by Danilo Masoni; Editing by Hugh Lawson)