(Adds dropped letter in Daiwa Capital (rpt Capital) Markets, 4th paragraph)
* FTSEurofirst 300 up 0.9 pct, Euro STOXX 50 up 1 pct
* Stocks erase weekly loss as Yellen says stimulus still needed
* Bouygues rallies after results
By Francesco Canepa
LONDON, Nov 14 (Reuters) - European shares rallied early on Thursday, recouping all the ground they lost earlier this week, after the Federal Reserve's incoming chair, Janet Yellen, eased concerns that stimulus measures would start to be rolled back this year.
Global stocks rallied after Yellen, in remarks released ahead of her confirmation hearing later on Thursday, said the Fed has "more work to do" to help the economy, indicating she was in no hurry to start trimming the bank's bond-buying programme, which has helped European stocks rise nearly 20 percent since it was announced in September 2012.
Investors have been weighing the positive impact of recent strong U.S. data, including a much better-than-expected monthly jobs report last week, against the prospect of a reduction of the Fed's quantitative easing programme (QE), which has driven investors out of safe haven bonds into riskier assets such as stocks.
"At the moment the data are less important than what the central banks tell you," said Grant Lewis, head of research at Daiwa Capital Markets.
"QE by itself is not going to deliver enduring growth in equity markets but to the extent that investors expect (it) to lead to higher earnings and GDP growth, then the policy makers aren't going to make a mistake in tightening too soon and choking growth off."
Yellen's remarks set a more positive market backdrop for the release of euro zone GDP figures at 1000 GMT, expected to show the currency bloc contracted in the third quarter, albeit at a slower pace than in the previous three months.
The pan-European FTSEurofirst 300 index was up 0.9 percent at 0836 GMT, erasing losses suffered earlier in the week, and the euro zone Euro STOXX 50 was up 1 percent at 3,050.18 points.
The FTSEurofirst 300 is up about 17 percent since late June, a rally mostly fuelled by central banks' massive liquidity injections as well as by improvements in European economic data.
French conglomerate Bouygues topped gainers as it rose 6 percent, with brokers highlighting a rise in the group's third quarter (Q3) earnings before interest and taxes (EBIT) in results released late on Wednesday.
"Q3 results were in line at top-line level but posted a very strong EBIT beat, mainly thanks to better profitability at the construction and Telecom businesses," analysts at UBS said in a note.
"While we admit strong execution in 2013 and results above our expectations we notice the outlook remains difficult for macro and competitive reasons," they added, reiterating their sell stance on the stock.
Volume on the shares was heavy at nearly 80 percent of its full-day average for the past three months, Thomson Reuters data showed.
The stock, which is up 63 percent since November 2012, has been heavily shorted, with 7.5 percent of its share capital out on loan, equal to nearly a quarter of all shares available to be borrowed, Markit data showed.
Short sellers borrow a security and sell it, betting they will be able to buy it back at a lower price before returning it to the lender, pocketing the difference.