U.S. data on Wednesday showed employment and service sector activity picking up last month, countering some of the gloom coming from Europe and China, and encouraging hopes that Friday's nonfarm payrolls report may surprise on the upside.

The FTSEurofirst 300 index .FTEU3 rose 0.3 percent to 1,104.14 points, recovering from two consecutive days of slight losses, and led by gains in the banking sector.

"Economic figures from the United States yesterday helped counter-balance some disappointments elsewhere like in Europe and lifted expectations for better than predicted numbers in the coming days," said Keith Bowman, equity analyst at Hargreaves Lansdown, said.

The euro was up 0.3 percent against the dollar to around $1.2940 with attention firmly on the ECB meeting which is not expected to cut rates but is expected to give an update on the economic outlook and its current talks with Spain.

Markets are waiting for Spain to request a rescue from other euro zone members as this would trigger an ECB bond buying program that could boost the euro and send peripheral government bond yields sharply lower.

Ahead of the ECB meeting, debt markets were little changed awaiting a Spanish debt auction for up to 4 billion euros of mostly shorter term bonds that could add to the pressure on Madrid to act.

Later on Thursday, weekly jobless claims and U.S. factory orders for August will be released, as well as minutes from the U.S. Federal Reserve's September 12-13 meeting at which the central bank launched aggressive stimulus packages aimed at reducing high unemployment.

These reports precede Friday's monthly jobs data, the first such labor market update since the Fed's action.

(Reporting by Richard Hubbard; editing by Philippa Fletcher)

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