European stocks rally on Trichet "no bias" comment

LONDON, July 3 (Reuters) - European shares rallied on Thursday as investors read comments from European Central Bank President Jean-Claude Trichet to mean the bank would pause after it delivered a widely expected 25 basis points rise.

At 1301 GMT, the FTSEurofirst 300 index of top European shares was up 0.7 percent at 1,176.16 points.

"He is very clearly signalling that he has no intention of tightening again: "starting from here, I have no bias" - you can't get clearer than that," said James Shugg, international economist at Westpac.

"The main reason is Trichet has come out and said from here on he's got absolutely no bias," said a trader. "Some people were fearful of the tone of what he would say, that interest rates would go higher in the future, but the fact that he's said he's got no bias from here shuts the door on the fact that more interest rates are inevitable." "You also have the U.S. closed tomorrow ... you're starting to see some of the hedge funds come in and short cover ahead of the weekend," the trader added.

Banks were the top positive influence on the European market. Royal Bank of Scotland (RBS.L: Quote, Profile, Research, Stock Buzz) was up 4.3 percent, while BNP Paribas (BNPP.PA: Quote, Profile, Research, Stock Buzz) and Credit Agricole (CAGR.PA: Quote, Profile, Research, Stock Buzz) were up between 3.3 and 6 percent.

(Reporting by Amanda Cooper, Antonina Vorobyova and Sitaraman Shankar)