European stocks rose early on Monday, extending the previous session's tentative rebound from a seven-week low, as investors hope euro zone leaders will unveil fresh measures to resolve the region's debt crisis ahead of next week's European Union summit.
Sentiment was also boosted by a report in Italian newspaper La Stampa suggesting the International Monetary Fund was preparing a rescue plan for Italy worth up to 600 billion euros, later dismissed by an IMF spokesperson.
At 0801 GMT, the FTSEurofirst 300 <.FTEU3> index of top European shares was up 0.8 percent at 915.33 points, led by banking stocks such as Societe Generale
The market's gains were capped, however, by a warning from rating agency Moody's saying the rapid escalation of the region's sovereign and banking crisis threatens the rating of all European government bonds.
Moody's is sounding the alarm for the euro zone. It's a reminder of what's already in the prices: not a single country is immune from the crisis, said Sebastien Barthelemi, analyst at Louis Capital Markets, in Paris.
The question now is: are we heading towards more integration or towards the disintegration of the euro zone?
(Reporting by Blaise Robinson)