* STOXX 600 up 0.3 pct
* UBS falls on disappointing wealth management unit results
* Financials rise, consumer staples fall on rising US yields
* Temenos gains after pulling out of Fidessa bid
* Metro sinks as analysts digest Friday profit warning (For a live blog on European stocks, type LIVE/ in an Eikon news window)
By Helen Reid and Danilo Masoni
LONDON, April 23 (Reuters) - European shares edged up on Monday as a rise in U.S. Treasury yields helped lift bank stocks to nearly 5-week highs, more than offsetting a disappointing update from UBS and losses among bond-proxy sectors.
The pan-European STOXX 600 benchmark index rose 0.35 percent, reversing initial losses, as gains in financials gathered pace and Wall Street opened in positive territory.
Swiss bank UBS fell 2.5 percent, among the top STOXX losers despite reporting first-quarter earnings ahead of analysts' estimates.
The bank struck a cautious note for the coming quarter, its CET1 ratio of capital requirements slightly fell short of expectations and the wealth management business disappointed.
"While the IB unit delivered a strong beat, other units, particularly Global Wealth Management (with a small, approximately 1 percent miss on both assets under management and gross margin) slightly disappointed," said Baader Helvea analysts.
Financials, which benefit from rising yields, however, were broadly positive with the banking index up 0.75 percent. Italian banks rose 1 percent to their highest level in more than 2 years after a report said the ECB was considering shelving planned rules that would have forced bank to set aside more money against their stock of unpaid loans.
Consumer staples stocks, which investors have held as proxies to bonds for their stable revenues and income stream, took the most points off the STOXX index after U.S. yields hit their highest level since January 2014 before paring gains.
Nestle, AB InBev and Unilever were among the worst-hit, falling 0.2 to 1 percent
Reckitt Benckiser shares tumbled 1.9 percent, dented by a price target cut from JP Morgan.
"Despite weaker economic growth momentum, defensives have struggled to consistently outperform and we remain generally negative given our forecasts that bond yields will rise again," wrote Goldman Sachs strategist Peter Oppenheimer.
Results spurred the biggest moves on Monday. Overall, MSCI euro zone companies are expected to report earnings growth of 4.9 percent from the first quarter of 2017, according to Thomson Reuters data.
A spate of broker rating cuts bruised German retailer Metro , down 9.3 percent at the bottom of the STOXX after Friday's profit warning on poor performance in its Russian operations.
Baader Helvea, JP Morgan, Kepler Cheuvreux and Bernstein all cut their price targets on the stock, while HSBC cut it to "reduce" from "buy".
Fresenius Medical declined 4.2 percent after the German dialysis specialist cut its 2018 sales target.
Strong growth in its Chinese market helped boost Philips' first-quarter results above expectations, sending its shares up 5.5 percent. The Dutch health technology company's CEO said he saw rising trade tensions between the U.S. and China having a negative impact on its results, however.
And in an incipient sign of this year's surge in crude oil prices trickling down to component makers, Rotork, which makes valves for the oil and gas industry, reported strong first-quarter results sending its shares up 10.9 percent.
M&A news also rumbled on. Shares in Swiss banking software business Temenos gained 5.5 percent after it said it would not raise its bid for Fidessa.
The British financial trading systems firm ditched Temenos in favour of a 1.5 billion pound deal with rival bidder Ion.
Reporting by Helen Reid, editing by Julien Ponthus and Richard Balmforth