* FTSEurofirst 300 index up 0.9 percent
* Banks, commods gain
* Drugmakers fall By Joanne Frearson
LONDON, Aug 24 (Reuters) - European shares rose in early trade on Monday, hitting their highest level in more than 10 months, with banks and commodity stocks gaining as investors become more confident about the prospects of a global recovery.
By 0818 GMT, the pan-European FTSEurofirst 300 index of top shares was up 0.9 percent at 975.49 points, having hit a 10-month high of 977.93 points earlier.
The index is up around 50 percent since reaching a lifetime low in early March and is up about 17 percent for the year.
"There are no specific stories out there, there is no good news and no bad news. Asian markets were ok overnight and the outlook for the U.S. looks reasonable so there is not reason for Europe to take the top off," said Howard Wheeldon, strategist at BGC Partners.
Banks added the most points to the index. Barclays, UniCredit, UBS and Lloyds Banking Group were up 1.8 to 3.8 percent.
Miners tracked higher metal prices with copper gaining 1.4 percent, aluminium up 1.1 percent and nickel up 3.5 percent on a brighter economic outlook.
Anglo American, Antofagasta, BHP Billiton, Eurasian Natural Resources Corporation, Rio Tinto and Xstrata were 2.8 to 4.4 percent higher.
Energy stocks were higher as crude rose above $74 a barrel extending its rally to trade near a 10-month high.
BG Group, Cairn Energy, Royal Dutch Shell, Total and Tullow Oil were up 1.2 to 2.6 percent.
DEFENSIVES FALL
On the downside, defensive stocks were lower as investors switched into cyclicals.
Drugmakers were among the biggest losers on the index with Roche and Sanofi-Aventis both down 0.5 percent.
Turning to economic news, markets were given further support as European Central Bank Governing Council Member Ewald Nowotny said over the weekend that the European economy will improve in the second half, driven by policy measures, but a sustained recovery will likely not take hold until the beginning of 2010.
But Nouriel Roubini, one of the few economists who accurately predicted the magnitude of the world's financial troubles, sees a "big risk" of a double-dip recession, according to an opinion piece posted on the Financial Times website on Sunday. "Markets have been reflecting the government stimulus around the world and getting far too excited. ... Not sure if this is going to be sustainable as we head up towards the (UK) bank holiday weekend," said Justin Urquhart Stewart, director at Seven Investment Management.
"We have to be extremely careful of the market getting too carried away and investors losing track of valuations," he said.
Meanwhile, euro zone industrial new orders, due out at 0900 GMT, will provide a further gauge on the state of the region's economic picture. Investors will also keep an eye on Chicago Fed Index for July, due at 1230 GMT, and U.S. Midwest manufacturing data, which will be released at 1600 GMT.
Across Europe, the FTSE 100 index was up 0.9 percent, Germany's DAX was 0.9 percent higher and France's CAC 40 was up 0.8 percent.
(Editing by Erica Billingham)