Euro zone shares jump on German data, ECB easing bets

* Euro STOXX 50 up 1 pct, FTSEurofirst 300 up 0.4 pct

* ECB stimulus bets, German data boost euro zone stocks

* Biggest M&A wave in 7 years also lifts sentiment

By Francesco Canepa

LONDON, Nov 24 (Reuters) - Euro zone shares rose on Monday, adding to Friday's strong gains, as expectations of more monetary stimulus in the bloc and some positive German economic data boosted sentiment.

Investors were betting the European Central Bank would soon unveil new measures to expand its balance sheet, possibly including government bond purchases, after President Mario Draghi promised on Friday to use whatever means necessary to raise inflation.

The euro zone Euro STOXX 50 index was up 1 percent at 3,225.47 points at 1150 GMT, taking its gain since the close on Thursday to 4 percent. If it holds Monday's gain until the close of trade it would mark the biggest two-day rise since April 2013.

Euro zone banks, which are heavily exposed to the bloc's economy and own significant amounts of sovereign debt, were the best sectoral performers, rising 2 percent.

Export-oriented auto stocks rose 1.5 percent as the prospect of further ECB easing sent the euro flirting with a two-year trough against the dollar.

Around Europe, Germany's DAX index and France's CAC 40 rose 0.8 percent and 0.9 percent, respectively, outperforming a 0.1 percent fall in Britain's FTSE 100 and Switzerland's SMI.

The DAX extended gains after data showed German business sentiment rebounded in November, a sign that Europe's largest economy may be gaining some momentum after narrowly avoiding a recession in the third quarter.

"One data point doesn't make a trend and you're still going to see weakness out of the European economy in the fourth quarter," said Patrick Armstrong, chief investment officer of macro hedge fund Plurimi Investment Managers.

"We're still very bullish on European assets just because of the ECB policy that is going to trump everything else."

The pan-European FTSEurofirst 300 index of top European shares was up 0.4 percent at 1,390.01 points, having surged 14 percent since a low hit in mid-October, lifted by ECB stimulus bets and a recent raft of M&A deals.

"Fund managers have not been selling equities during the recent pull-backs because of the 'ECB put': if the situation worsens, the central bank is ready to take further steps," Jean-Louis Cussac, the head of Paris-based firm Perceval Finance, said.

Shares (Frankfurt: DI6.F - news) in Britain's BT rose 2.7 percent after it said it had been approached by shareholders in Spain's Telefonica , owner of O2, and another UK network operator about BT buying their British businesses.

UK insurer Friends Life surged 5.1 percent after rival Aviva (Other OTC: AIVAF - news) agreed terms on a possible deal to buy it for 5.6 billion pounds ($8.8 billion). Aviva shares slipped 4.8 percent.

Global M&A activity in 2014 has hit a level not seen in seven years, according to Thomson Reuters data.

Bucking the trend, shares in Petrofac Ltd plunged 24 percent after the oil and gas services firm unveiled profit targets well below analysts' forecast, highlighting how the sector is struggling with plummeting crude oil prices.

Europe bourses in 2014: http://link.reuters.com/pap87v

Asset performance in 2014: http://link.reuters.com/gap87v

Today's European research round-up (Additional reporting by Blaise Robinson in Paris; Editing by Susan Fenton)