GLOBAL MARKETS-M&A talk lifts stocks, Iraq tensions ease slightly

Tue Jun 17, 2014 5:17am EDT

By Jamie McGeever
    LONDON, June 17 (Reuters) - A bout of mergers and
acquisitions gave European stocks a shot in the arm on Tuesday,
while commodity and emerging market investors were somewhat
calmed by the absence of an escalation in the Iraq crisis
overnight.
    Oil and gold eased back as U.S. and Iranian officials, in a
rare sign of rapprochement, discussed the crisis on the
sidelines of a nuclear conference in Vienna although they both
ruled out military cooperation to face down the Sunni militant
onslaught that threatens to break the country up.
 
    "There is a growing sense that we could see a stalemate
after the U.S. signaled that it was ready to talk with Iran,"
said Jim Reid, market strategist at Deutsche Bank.
    The slightly more benign geopolitical backdrop allowed
European equities to take their cue from M&A speculation. Shares
in British pharmaceutical group Shire led European
bourses higher after Reuters reported that it hired investment
bank Citi as an adviser, expecting to receive takeover
approaches following a wave of deals in the healthcare sector.
    "We've been buyers of Shire recently and on the back of this
we'd look to add to positions," said Manoj Ladwa, the head of
trading at TJM Partners.
    Healthcare companies have seen a wave of merger and
acquisition speculation in the past two months, and Shire's
stock has risen nearly 30 percent since mid-April.
    At 0845 GMT Europe's leading FTSEurofirst 300 index 
was up 0.4 percent at 1389 points.
    Germany's DAX was up 0.8 percent at 9966 points,
Britain's FTSE 100 was up 0.2 percent at 6765 points and
France's CAC 40 was up 0.5 percent at 4533 points.
    Brent crude oil futures fell 0.5 percent to $112.39 a barrel
, pulling further back from last week's nine-month high,
and gold also fell 0.5 percent to $1,265 an ounce.
    
    UK INFLATION FALLS 
    Investors' worries over Iraq, however, bubbled closely under
the surface, as the possibility of the country breaking up
remains distinct after militants from the Islamic State of Iraq
and the Levant seized a large swathe of northern Iraq.
    This helped support traditional safe-haven government bonds
like U.S. Treasuries, with the 10-year yield at 2.59 percent
, flat on the day and off last week's peak of 2.662
percent.
    The immediate focus is on the Federal Reserve's monetary
policy statement on Wednesday, when the U.S. central bank is
expected to announce it will continue paring its bond purchase
programme.
    In currencies, the Australian dollar fell 0.6 percent to
$0.9344 after minutes of the Australian central bank's
June 3 meeting were more dovish than expected. 
    Sterling retreated from Monday's five-year high above $1.70
after British inflation fell to 1.5 percent in May, its lowest
in over four years, casting some doubt whether Bank of England
policymakers will raise interest rates this year.
 
    The pound slipped 0.2 percent to $1.6950, while the
euro was steady against the dollar at $1.3573 and the
greenback was up slightly against the yen at 102.02 yen.
    Elsewhere, emerging markets took stock of a 10 percent
plunge in Argentina's Merval stock market index on
Monday after the U.S. Supreme Court declined to hear the
country's appeal over its battle with hedge funds that refused
to take part in its debt restructurings.
    The move risks sending Argentina into a fresh sovereign
default. President Christina Kirchner said in an address to the
nation that Argentina will honour all its restructured debts,
but didn't say how.  
    Turkey's lira and South Africa's rand held firm against the
dollar . 
    "Despite the negative country-specific emerging market
headlines, overall emerging market appetite remains fairly
healthy," said Deutsche Bank's Reid.
    This was despite tension in Ukraine showing no sign of
abating as Russia cut off gas to Ukraine in a dispute over
unpaid bills that could disrupt supplies to the rest of Europe
and set back hopes for peace between the former Soviet
neighbours. 

 (Reporting by Jamie McGeever, additional reporting by Francesco
Canepa in London; Editing by xxxxxxxxxx; To read Reuters Global
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