European stocks pegged back by losses at Linde

* Linde (Amsterdam: LE6.AS - news) slumps after cutting medium-term targets

* British banks gain after stress-test results

By Sudip Kar-Gupta

LONDON, Dec 1 (Reuters) - European shares fell on Tuesday, weighed down by a slump in Linde after the world's biggest industrial gases company by sales cut its 2017 profit target.

Linde fell 13.8 percent, dragging down sector peer Air Liquide, and together they took the most points off the pan-European FTSEurofirst 300 index.

The FTSEurofirst 300 index fell 0.6 percent. The euro zone's blue-chip Euro STOXX 50 retreated 1 percent while Germany's DAX, which includes Linde as a constituent, fell 1.2 percent.

Mirabaud Securities equity sales executive Rupert Baker said Linde's woes showed that the recent European stock market rally was of a "low quality", driven by prospects of more aid from the European Central Bank (ECB) rather than robust earnings.

"Many of Europe's leading companies are not producing the sort of upgrades one would expect from them," he said.

However, European banks

Peregrine & Black senior analyst Markus Huber said overall market sentiment remained positive on hopes that the ECB will cut interest rates on euro deposits and extend its quantitative easing (QE) programme when it meets on Thursday.

Nevertheless, Huber added some investors might refrain from putting new money into stocks until the end of the week, when the near-term macroeconomic picture would be clearer.

Market players are looking ahead to U.S (Other OTC: UBGXF - news) . jobs data on Friday that is expected to give new clues on the likelihood of a U.S. interest rate rise this month. (Additional reporting by Atul Prakash; Editing by Louise Ireland (Other OTC: IRLD - news) )