Europe shares extend rally on hopes of ECB action

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European stocks rose early on Monday, rallying for a third straight session, propelled by mounting expectation the European Central Bank this week will unveil fresh measures to ease the tension surrounding the borrowing costs of Spain and Italy.

At 0703 GMT, the FTSEurofirst 300 index of top European shares was up 0.4 percent at 1,061.13 points.

Recent comments by European officials have raised expectations the ECB, which holds its policy meeting on Thursday, will resume its bond buying programme.

"Markets have reached a point that has priced in action by the ECB. This sets up a situation where (ECB President Mario) Draghi will now have to back his words with action or we could see markets tumble quicker than they rallied," GFT market strategist Andrew Taylor said.

On the earnings front, Air France-KLM surged 8 percent at open after saying it has halved its operating loss on improved passenger activity.

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