(Corrects typographical error in headline)
* FTSEurofirst 300 up 0.2 percent
* China's rise in required reserves keeps gains in check
* Peripherals in red as euro zone debt worries persist
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By Blaise Robinson
PARIS, Dec 10 (Reuters) - European stocks edged higher on Friday, on track to post their biggest weekly gain since early November, but the rise was limited by profit-taking in shares of financial institutions after a sharp 10-day rally.
Gains were also kept in check by lingering concerns over China's efforts to tighten monetary policy after the country's central bank raised lenders' required reserves by 50 basis points, its sixth increase this year.
At 1220 GMT, the FTSEurofirst 300 index of top European shares was up 0.2 percent at 1,125.72 points, not far from a two-year high hit in the previous session.
The benchmark index was on track to record a weekly gain of 2 percent, its biggest weekly gain since early November.
"Traditionally, December is a bullish month, and all the technical signals are saying this month won't be different," said Vincent Ganne, analyst at IG Markets, in Paris.
"Overall, the CAC should outperform the DAX this month as construction, banks and insurance rebound while there will be profit-taking in auto stocks after stellar gains. For peripherals, it's still too risky. I wouldn't bet on a rebound in these markets."
Spain's IBEX 35 was down 0.7 percent as nervous investors book profits on banking stocks such as Santander, down 2.3 percent, Banco de Sabadell down 1.9 percent and BBVA down 1.8 percent after strong gains.
In a research note, UBS analysts quantified further potential capital requirements for Spanish banks at up to 120 billion euros.
"Sovereign concerns have eased, but we think they may persist until larger provisioning buffers and stronger capital are rebuilt in the financial sector," UBS analysts wrote.
The Peripheral Eurozone Countries Index was down 0.3 percent.
Big insurance stocks also lost ground on Friday following a brisk rally over the past few days, with AXA losing 1.7 percent and Aegon falling 1.3 percent.
Mining stocks moved in the opposite direction, with Xstrata up 1.5 percent, rising along with metal prices after strong imports data from top consumer China.
GREECE'S ATG, SPAIN'S IBEX BIG LOSERS
So far this year, the auto sector has surged 50 percent, the basic resources sector is up 24 percent, while the insurance sector is up 3.2 percent and the banking sector is down 7.5 percent.
Similar divergences exist between benchmark indexes across Europe, with Germany's DAX up 18 percent so far this year, the FTSEurofirst 300 up 7.6 percent, UK's FTSE 100 up 7.2 percent, France's CAC 40 down 1.9 percent, Spain's IBEX down 15 percent and Greece's ATG down 31 percent.
Irish banks took a beating on Friday, with Bank of Ireland down 4.2 percent. Fitch downgraded credit ratings on Irish banks a day after stripping Ireland of its 'A' credit status following Dublin's request for an EU/IMF bailout.
Overall, the FTSEurofirst 300 has gained nearly 7 percent over the past two weeks as a brightened U.S. economic outlook eclipsed worries over euro zone debt.
"I don't expect the rises to last. Just because we have seen a lull in the euro zone debt crisis does not mean it is all over. I would be wary about the recent rises," said Jeremy Batstone-Carr, head of equities at Charles Stanley.
(Additional reporting by Joanne Frearson in London; Editing by Erica Billingham)