European stocks rose early on Monday, bouncing from a 3 1/2-month closing low, on signs political negotiations to overcome major fiscal policy disagreement in the United States had started well.

On Friday, leaders of the US Senate and House said they would be flexible in efforts to settle fiscal policy differences to avert a $600 billion 'fiscal cliff' of tax hikes and spending cuts, sparking a late rally on Wall Street.

“The rebound should be quite significant because there are new hopes regarding the fiscal cliff and last week was quite bad,” a London-based trader said.

He expected France's CAC 40, up 1 percent at 3,374.00 points at 10:01 SA time, to rise between 1 and 2 percent in the very short term, with Thursday's close at 3,400 points as a possible target.

The pan-European FTSEurofirst 300 index, which fell 2.7 percent last week, was up 0.8 percent, led by cyclical sectors including basic resources and banks. - Reuters