* FTSEurofirst 300 rises 1.3 percent, 2nd session of gains
* Cadbury up 39 percent on $16.7 bln Kraft bid, rejects offer
* Financials among top gainers, miners track metals prices
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By Atul Prakash
LONDON, Sept 7 (Reuters) - European equities on Monday extended the previous session's sharp gains, boosted by Cadbury which surged 39 percent on a $16.7 billion bid by North America's Kraft Foods.
At 0844 GMT, the FTSEurofirst 300 index of top European shares was up 1.3 percent at 974.72 points after climbing 1.3 percent higher in the previous session.
The index, which slumped 45 percent in 2008, is up 17 percent this year and has jumped 50 percent since hitting a record low in early March.
"We are quite optimistic for the short term because everything is there in order to manage the uptrend," said Romain Boscher, head of equity management at Groupama Asset Management.
"The market is talking a lot more about M&A stories this morning. This kind of newsflow coupled with a normalised valuation environment is what the market is waiting for in order to get more bullish," he added.
Kraft said on Monday it had offered 300 pence in cash and 0.2589 new Kraft shares for each Cadbury share in the hope that it can create a "global powerhouse in snacks, confectionery and quick meals" with combined revenues of about $50 billion.
Cadbury, the world's second biggest confectionery group, has rejected the approach by Kraft, which still hopes it can clinch a deal.
Other food producers also gained after the Cadbury news. The Anglo-Dutch giant Unilever was up 2.6 percent, Nestle, the world's biggest food group, rose 0.8 percent and Danone gained 4.3 percent.
The market also got support after the Group of 20 finance ministers and central bankers said in a closing statement that they would not remove economic stimulus until the global recovery was well entrenched.
Under proposed new global rules agreed by top central bankers and regulators on Sunday, banks will have to set aside more profits as a cushion against hard times and face limits on how much debt they can run up.
Financial stocks were among top gainers, with Barclays, Lloyds Banking Group, Royal Bank of Scotland and Societe Generale, Natixis and Commerzbank rising 0.1-4.3 percent.
Miners got strength from higher metals prices, which rose on expectations of an economic recovery and growth in China. BHP Billiton, Anglo American, Antofagasta, Rio Tinto, Xstrata and Eurasian Natural Resources rose 1.5-2.9 percent.
Lonmin surged 6.5 percent after weekend press reports that Xstrata said it asked its bankers to study the viability of a new 3 billion pound bid for the platinum producer.
SIGNIFICANT MOVERS
Among other individual movers, Whitbread rose 15 percent as Britain's biggest hotel operator said it was confident on the full year after reporting a 2.6 percent fall in underlying half year sales, hit by slower trade at its budget Premier Inn chain.
Surging sales at discount clothing chain Primark led owner Associated British Foods to nudge up its full-year earnings forecast and boosted its shares as much as 6 percent to a 14-month high.
Spain's Telefonica was up 2.2 percent. It said on Sunday that it had reached a deal with China Unicom whereby each would buy $1 billion worth of each other's shares as part of a strategic alliance.
Swiss Re, the world's second-biggest reinsurer, gained 3.3 percent after it said reinsurance prices were rising overall and it was well positioned for the January 2010 renewals season.
U.S. markets are closed on Monday for a holiday.
Across Europe, Britain's FTSE 100 index, Germany's DAX and France's CAC 40 were 1.3-1.4 percent. (Reporting by Atul Prakash; Editing by Jon Loades-Carter)