European stocks rallied on Monday, reversing a portion of the previous session's sell-off as investors took advantage of the pull-back to increase their exposure to risky assets such as banks and miners.

The aerospace and defense sector will be in the spotlight after key EADS (EAD.PA) shareholder Lagardere (LAGA.PA) said the conditions attached to a planned merger of the European aerospace group with Britain's BAE Systems (BAES.L) were unsatisfactory and called on management to reexamine the project.

The U.S. Defense Department on Friday awarded United Launch Alliance, a 50-50 joint venture of Lockheed Martin Corp (LMT.N) and Boeing Co (BA.N) a contract valued at $1.17 billion to provide satellite launches using its Delta IV and Atlas V rockets.

The world's airlines have raised their profit forecasts for 2012 and expect improved performance in 2013 as efforts by North American airlines to trim capacity have boosted margins and demand in Asia has held up despite a weak global economy, the International Air Transport Association (IATA) said on Monday.

Unionized workers at the Canadian operations of Fiat SpA's (FIA.MI) Chrysler Group LLC have voted in favor of a four-year labor agreement with the company, the Canadian Auto Workers union said on Sunday. Some 90 percent of the Chrysler workers who voted backed the deal, the CAW said in a statement. The agreement covers 8,000 employees.

Dollar Tree Inc (DLTR.O) said in a filing that it sold off its ownership interest in discount retailer Ollie's Holdings and that the sale will boost its third-quarter profitability by 16 cents to 17 cents a share.

American Securities LLC is in the lead to buy auto parts suppliers from Carlyle Group LP (CG.O) and KPS Capital Partners LP, in deals that could collectively top $1.5 billion, people familiar with the matter said.

A U.S. appeals court ruled that Google's Motorola Mobility unit (GOOG.O) cannot enforce a patent injunction that it obtained against Microsoft Corp (MSFT.O) in Germany.

Most U.S. high-tech companies expect to export more cell phones, tablets and other electronics over the next two years to growing middle-class populations in developing nations, citing free trade pacts and rising labor costs abroad, a survey found.

Phone maker Nokia Oyj NO1V.HE is expected to announce a deal that will give customers of technology company Oracle Corp (ORCL.O) access to Nokia's mapping services, the Wall Street Journal reported.

On the macro front, investors awaited the final Markit Manufacturing PMI for September, due at 1258 GMT, as well as the Institute for Supply Management's September manufacturing index, due at 1400 GMT. Economists in a Reuters survey expect a reading of 49.7 versus 49.6 in August. Also on deck, August construction spending, due at 1400 GMT.

Wall Street closed its best third quarter since 2010 after a wave of central bank actions sparked a dramatic reversal in equity markets, but signs of weakness in the economy drove stocks lower on Friday.

The Dow Jones industrial average .DJI fell 48.84 points, or 0.36 percent, to close at 13,437.13. The Standard & Poor's 500 Index .SPX lost 6.48 points, or 0.45 percent, to finish at 1,440.67. The Nasdaq Composite Index .IXIC dropped 20.37 points, or 0.65 percent, to close at 3,116.23.

(Reporting by Blaise Robinson/editing by Chris Pizzey, London MPG Desk, +44 (0)207 542-4441)

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