European shares up for third day; oils gain

* FTSEurofirst 300 up 0.4 percent

* Banco Popolare rises after results

* For up-to-the-minute market news, click on [STXNEWS/EU]

By Brian Gorman

LONDON, Aug 30 (Reuters) - European shares rose in early trade on Monday, extending a rally to a third day after reassurances the U.S. Federal Reserve was ready to take further steps if needed to spur economic recovery. Trading was set to be subdued with British markets closed for a holiday.

At 0839 GMT, the FTSEurofirst 300 <.FTEU3> index of top European shares was up 0.4 percent at 1,030.07 points, after rising 0.6 percent on Friday.

The European benchmark index is up nearly 60 percent from the lifetime low hit on March 9, 2009. But it is down more than 1 percent in 2010, as investors have become worried about European debt levels and the strength of the economic recovery. Energy companies rose, as crude prices stayed near an eight-week high. Total and ENI rose 0.4 percent and 0.6 percent respectively.

"(Bernanke's statement) was reassuring, but predictably so. There was no big positive surprise," said Bernard McAlinden, investment strategist at NCB Stockbrokers in Dublin.

"As long as the economy stays out of recession, and we have some growth, the markets won't be too worried. The consensus is there won't be a double dip," he said.

Across Europe, Germany's DAX <.GDAXI> and France's CAC40 <.FCHI> were up 0.2 percent and 0.1 percent respectively The Euro STOXX 50 <.STOXX50E>, the euro zone's blue chip index, rose 0.2 percent to 2,634.70 points, pushing nearer 2,669, the 38.2 percent Fibonacci retracement of the index's fall from an April high to a May low, a key support level.

ZODIAC IS STAR PERFORMER

French aerospace parts maker Zodiac Aerospace rose 14 percent on reports French conglomerate Safran was set to launch an offer.

Norwegian group Orkla rose 5.4 percent after South Korean group POSCO <005490.KS> said it was considering a takeover of Elkem, a maker of silicon for solar panels, and a unit of Orkla.

News of mergers and acquisitions has been a factor in buoying markets in recent days. But reaction on Monday to the latest M&A developments was not totally positive.

German chipmaker Infineon fell 1.3 percent after agreeing to sell its wireless unit to Intel for $1.4 billion. [ID:nLDE67P1WH]

French drugmaker Sanofi-Aventis rose 0.4 percent after publicly disclosing its $18.5 billion, $69-per-share cash offer for U.S. biotechnology company Genzyme Corp . [ID:nN29251304]

Novartis rose 1 percent as an experimental blood thinner it is developing moved into final-stage clinical testing.

Shares in German utilities RWE and E.ON were both up 1 percent after Chancellor Angela Merkel spoke out in favour of extending the use of nuclear power plants.

Banco Popolare rose 3 percent after posting late on Friday a net income of 360 million euros in the second quarter, compared with a loss of 14.4 million euros a year before. [ID:nBIA273ae]

Other banks to gain included Banco Santander and Societe Generale , up 1 percent and 1.1 percent respectively.

The Bank of Japan buckled under government pressure and eased monetary policy at an emergency meeting on Monday in an effort to curb a rise in the yen threatening a fragile economic recovery. [ID:nTOE67S01V]

"The Bank of Japan stepped up its unconventional stimulus, but not any more than had been expected," said McAlinden.

U.S. stocks posted their best gains in nearly four weeks on Friday. U.S. Federal Reserve Chairman Ben Bernanke told central bankers at a conference in Jackson Hole, Wyoming the recovery has weakened more than expected but the U.S. central bank was ready to take further steps if needed to spur the recovery. [ID:nN27259859] (Editing by Dan Lalor)