Europe shares extend gains as banks rally

LONDON, July 3 (Reuters) - European shares rallied to session highs in mid-afternoon trade on Thursday, fueled by a rally in banks after in-line U.S. jobs data and a signal from the European Central Bank that it may not raise rates again.

By 1331 GMT the FTSEurofirst 300 index of top European shares was up 1 percent at 1,179.47 points, having hit a session high of 1,181.81 points.

Banks accounted for a net rise of nearly 4 points to the index, compared with a net rise of 0.97 points at 1250 GMT, as Royal Bank of Scotland (RBS.L: Quote, Profile, Research), BNP Paribas (BNPP.PA: Quote, Profile, Research), Societe Generale (SOGN.PA: Quote, Profile, Research) and ING (ING.AS: Quote, Profile, Research) were up between 2.9 and 4.7 percent.

The ECB raised rates as expected, but bank President Jean-Claude Trichet's commitment to having "no bias" on monetary policy pushed up European stocks and government bond prices and weighed on the euro <EUR=> as investors cut the chances of further rate rises.

Adding to the positive tone in equities was the U.S. monthly employment report for June that came in largely in line with forecasts and boosted U.S. stock futures DJU8 SPU8 NDU8.

(Reporting by Amanda Cooper)