* Euro STOXX 50 up 0.6 pct, posts biggest 2-day rise in 17 months
* ECB stimulus bets, German data boost euro zone stocks
* Biggest M&A wave in 7 years also lifts sentiment
By Francesco Canepa
LONDON, Nov 24 (Reuters) - Euro zone shares rose on Monday, with a regional index bagging its biggest two-day rise in 17 months, as expectations of more monetary stimulus and some positive German economic data boosted sentiment.
After European Central Bank chief Mario Draghi promised on Friday to use whatever means necessary to raise inflation, investors were betting the ECB would soon unveil new measures, possibly including government bond purchases.
The euro zone Euro STOXX 50 index rose 0.6 percent to 3,211.70 points, taking its gain since the close on Thursday to 3.5 percent, the biggest two-day rise since June 2013.
"We're still very bullish on European assets just because of the ECB policy that is going to trump everything else," said Patrick Armstrong, chief investment officer at Plurimi Investment Managers.
The index trimmed its gains in late trade after ECB governing council member Jens Weidmann, who is president of Germany's Bundesbank, said additional measures would encounter legal hurdles.
Euro zone banks, which are heavily exposed to the bloc's economy and own significant amounts of sovereign debt, were the best sectoral performers, rising 1.3 percent.
Export-oriented auto stocks rose 1.3 percent as the prospect of further ECB easing sent the euro flirting with a two-year trough against the dollar.
Sentiment was also boosted by data showing German business sentiment rebounded in November, a sign that Europe's largest economy may be gaining some momentum.
Shares in Britain's BT rose 3.7 percent after it said it had been approached by shareholders in Spain's Telefonica , owner of O2, and another UK network operator about BT buying their British businesses.
UK insurer Friends Life surged 5.9 percent after rival Aviva agreed terms on a possible deal to buy it for 5.6 billion pounds ($8.8 billion). Aviva slipped 5.4 percent.
Petrofac Ltd plunged 26 percent after the oil and gas services firm's profit targets disappointed, highlighting how the sector is struggling with plummeting crude oil prices.
Additional reporting by Blaise Robinson in Paris; Editing by Catherine Evans