European shares gain on ECB stimulus bets; Greece leads

(Updates prices at settlement)

* FTSEurofirst 300 up 0.5 pct

* Greece, Spain, Italy lead gains ahead of ECB meeting

* Telenor (Other OTC: TELNF - news) , TeliaSonera rally after deal to merge units

* Metro (Other OTC: MTRAF - news) , Adidas (Other OTC: ADDDF - news) sink on worries over exposure to rouble

By Francesco Canepa

LONDON, Dec 3 (Reuters) - European stocks rose on Wednesday, led by shares in Greece, Italy and Spain, as investors bet the European Central Bank would signal further economic stimulus at a policy meeting on Thursday.

Greece's ATG, Spain's Ibex and Italy's FTSE MIB were the best performing indexes in Europe, rising between 1 percent and 1.7 percent, led by heavyweight banks, which have sizeable holdings of sovereign debt.

Italian yields fell below 2 percent for the first time, with Spanish equivalents hitting a record low of 1.81 percent. The euro tumbled to a 27-month low against the dollar.

Money market traders polled by Reuters said the ECB will probably not announce new stimulus measures on Thursday.

But according to equities traders, investors anticipate ECB President Mario Draghi will open the door wider to the purchase of sovereign bonds at his press conference.

"The market is hopeful ahead of the ECB meeting tomorrow," Sara Carbonell of CMC Markets Spain said.

Despite heavy price discounting, euro zone business activity grew less than expected last month, a survey showed, suggesting the region's economy may contract again early next year.

"Draghi would please investors with some sort of timetable for quantitative easing, but even if he just repeats the ECB's strong commitment to act, it could be enough to spark a Santa Claus rally," Saxo Bank trader Andrea Tueni said.

Greek stocks were further boosted by speculation that Athens would reach a deal with its troika of lenders -- the International Monetary Fund, European Commission and European Central Bank -- over an extension of its bailout programme.

"It seems that at the end of the day there will be some sort of agreement after lots of compromises from the Greek side," a senior trader in Athens said. "Investors feel much more secure when the presence of the troika remains strict."

The FTSEurofirst 300 index of top European shares closed up 0.5 percent at 1,399.97 points.

Nordic telecoms operator surged after Norway's Telenor and Sweden's TeliaSonera agreed to merge their Danish operations, in a deal that is expected to ease cut-throat price competition.

Shares (Frankfurt: DI6.F - news) in German sportswear company Adidas AG and food retailer Metro featured among the main losers, hurt by worries over their exposure to Russia as the rouble continued its slide. (Editing by Gareth Jones/Ruth Pitchford)