* FTSEurofirst 300 up 0.3 pct, Euro STOXX 50 up 0.6 pct
* With lower QE3 expectations, focus back on ECB
By Blaise Robinson
PARIS, Aug 31 (Reuters) - European stocks rose in morning trade, halting a sharp three-day drop as investors started to look beyond Federal Reserve Chairman’s policy speech due later in the day and bet the expected ECB bond buying plan will ease the debt crisis.
At 0840 GMT, the FTSEurofirst 300 index of top European shares was up 0.3 percent at 1,081.18 points, after hitting a four-week low at the open.
The euro zone’s blue chip Euro STOXX 50 index was up 0.6 percent at 2,418.11 points, moving back above a key level pierced on Thursday, the 23.6 percent Fibonacci retracement of the market’s rally started in late July.
Fed Chairman Ben Bernanke addresses a gathering of world central bankers in Jackson Hole, Wyoming at 1400 GMT on Friday. He has used previous such gatherings to signal further policy easing.
But investors’ focus was already shifting towards the ECB meeting on Sept. 6, at which the central bank is expected to give details on its plan to relaunch its government bond buying programme to help fight the region’s economic crisis.
“The retreat of the last few days shows that expectations surrounding Jackson Hole have been lowered, and frankly not much should come out of it. The focus is turning back to Spanish and Italian bond yields,” Agilis Gestion fund manager Arnaud Scarpaci said.
Friday’s gains were led by Southern Europe stocks, with Spain’s IBEX rising 0.8 percent and Italy’s FTSE MIB up 0.9 percent.
Spanish lender BBVA was up 1 percent while Italian peer Banco Popolare gained 0.9 percent.
European equities sharply rose in the past few weeks after the ECB signalled it plans to buy Spanish and Italian bonds to help lower borrowing costs of the two indebted countries, as well as on expectations of further stimulus measures from the Fed.
The rally has recently lost steam, however, as doubts emerged about the details of the ECB plan and as a slew of better-than-expected U.S. macro data dampened hopes of a new round of quantitative easing.
“A number of euro zone countries are reluctant to give the ECB a blank cheque, which could again limit the central bank’s firepower, so things will remain very tense until Sept. 6,” Barclays France director Franklin Pichard said.
Pichard says the market could fall another 2.5 percent, “which would give a nice opportunity to get back into the market.”
Around Europe, UK’s FTSE 100 index was up 0.3 percent, Germany’s DAX index up 0.4 percent, and France’s CAC 40 up 0.6 percent.