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* STOXX Europe 600 index up 1.5 pct
* Basic Resources biggest sectoral gainer
* Banks rise after Bank of America upgrade
* Burberry slumps after update
By Danilo Masoni and Atul Prakash
MILAN/LONDON, Oct 18 (Reuters) - European shares bouncedback on Tuesday, with mining stocks and banks leading the way,while Burberry slumped following its earnings update.
The pan-European STOXX 600 index rose 1.5 percentto its highest level in nearly one week. However, the benchmarkindex is still down over 6 percent so far this year.
The market was helped by a 2.8 percent rally in the STOXXEurope 600 Basic Resources index, the top sector gainer,as metals prices rose, boosted by strong credit data in topmetals consumer China and a weaker dollar.
The European oil and gas index also increased 1.1percent on the currency moves and comments from some analyststhat markets might not be quite as over-supplied as thought.
"The market has been trading in a sideways range for acouple of months now. However, depressed stocks and sectors haveseen some rebound, with commodities stocks falling in thatsegment," said Gerhard Schwarz, head of equity strategy atBaader Bank in Munich.
Glencore Polymetal, Royal Dutch Shell, ENI rose between 1.1 to 3.4 percent.
Danish jeweller Pandora soared 7.3 percent, thetop gainer in the STOXX 600 index, with traders citing a bullishsurvey from Swedish broker Carnegie.
On the downside, Burberry fell 7.2 percent, evenafter the British luxury fashion label reported abetter-than-expected rise in second-quarter retail sales.
Traders said the stock was hit by some negative brokernotes. The group's total sales also fell 4 percent on anunderlying basis in the six months to end-Sept, hit by a fall inwholesale and licensing revenues.
"FX benefits aside, Burberry struggles to drive meaningfulgrowth," Liberum analysts said in note, adding that itsvaluation was at a premium.
Before Tuesday's fall, Burberry shares had jumped nearly 50percent since June.
French testing, inspection and certification company BureauVeritas fell 2.7 percent after the company cut itsoutlook for full year 2016 as the weakness in the oil and & gasand shipping markets weighed on its revenue.
Europe 600 Bank index rose 2.4 percent, the secondbiggest sectoral gainer, after Bank of America-Merrill Lynchupgraded regional banks to "overweight" on the back of lightpositioning, progress on restructuring in Italy and a turn inbond yields globally.. (Editing by Richard Balmforth)
