Europe shares edge up ahead of EU ministers meeting

* FTSEurofirst 300 index up 0.1 percent

* Healthcare firms gain; banks slip

* Caution lingers ahead of euro zone rescue fund discussion

By Harpreet Bhal

LONDON, Jan 17 (Reuters) - European shares edged up on Monday, with gains in healthcare stocks just offsetting weak banks in cautious trade ahead of a meeting of finance ministers to discuss changes to euro zone's rescue fund.

The pan-European FTSEurofirst 300 <.FTEU3> index of top shares closed 0.1 percent higher at 1,156.94 points, in relatively low volumes with U.S. markets closed for a holiday.

Gains in healthcare stocks gave some strength to the index, with Smith & Nephew up 3.5 percent after a weekend newspaper report that Johnson & Johnson was considering a fresh takeover approach for the artificial knee and hip maker worth at least 800 pence a share. [ID:nLDE70G0B7]

Weak banks capped further gains in the index ahead of the outcome of the euro zone finance ministers meeting later on Monday. Peripheral euro zone banks Banco Santander , National Bank of Greece and BBVA were down 1 to 1.6 percent.

The finance ministers are set to discuss changes to the effective lending capacity of the European Financial Stability facility (EFSF), though no final decision was expected, with Germany seeing no urgent need to boost the fund's size. [ID:nL3E7CH09B]

"It would be good for the euro zone as a whole if they (the ministers) can calm some of the nerves but by what actions? We will have to live with discussions about the debt problems for months and quarters to come," said Heinz-Gerd Sonnenschein, equity markets strategist at Deutsche Postbank in Bonn.

Germany is pushing for broader anti-crisis measures to be agreed at an EU summit in March and senior European sources said the sense of urgency in Berlin for boosting the fund had diminished after successful bond auctions last week in Spain and Portugal.

M&A BOOSTS SMITH'S

Merger and acquisition (M&A) hopes also helped British engineering firm Smith's Group rise 7.7 percent after it rejected a 2.45 billion pounds ($3.9 billion) bid approach for its medical services unit, which a person familiar with the matter said came from buyout firm Apax. [ID:nLDE70D21J]

Analysts remained upbeat on the near-term prospects for equities and expected sound fundamentals and strong corporate profits this season to attract investors.

"We have seen a reasonable amount of sell-offs already this year, and these have ultimately been pounced on by the bargain hunters keen to jump on board the market's medium-term positive trend," said David Jones, chief market strategist at IG Markets.

Among the gainers, SGS rose 2.3 percent after the world's largest inspection services company raised its dividend and said it saw stronger top-line growth this year after demand for its minerals and consumer testing services picked up in 2010. [ID:nLDE70C14N]

On the downside, Swiss luxury goods group Richemont fell 2 percent after it said the strong Swiss franc and higher year earlier comparative figures would weigh on its fourth quarter results. [ID:nLDE70D13B]

Norway's Telenor fell 1.9 percent after the firm and partner Altimo squared up for yet another battle over a proposed bid by their Russian mobile phone firm Vimpelcom for Egyptian tycoon Naguib Sawiris' telecoms assets. [ID:nLDE70G08I]

Across Europe, France's CAC-40 <.FCHI> and Britain's FTSE 100 <.FTSE> shed 0.2 and 0.3 percent respectively, while Germany's DAX <.GDAXI> was flat.

(Editing by Jane Merriman)