* M&A talk in pharma sector lifts European shares
* Euro dips to 2-week low, yuan falls to 14-month lows
* Ukraine tension seen as threat to riskier assets
(Updates prices, adds comments)
By Marius Zaharia
LONDON, April 22 M&A talk in the pharmaceutical
sector lifted European shares on Tuesday, but failed to support
the euro, which dipped to a two-week low against the dollar as
ECB policymakers renewed efforts to weaken it.
British newspaper the Sunday Times said U.S. pharmaceutical
giant Pfizer had approached British rival AstraZeneca
to propose a 60 billion pound ($101 billion) takeover.
Both companies declined comment to Reuters.
Eli Lilly and Co said on Tuesday it would buy
Novartis AG's animal health business for $5.4 billion
in cash to strengthen and diversify its Elanco unit.
The FTSEurofirst 300 index of top European shares
was up 1 percent at 1,342.38 points, building on last week's
gains on the back of largely better-than-expected results by
U.S. companies. U.S. stock futures suggested a higher open in
New York as well.
"There's strong corporate activity which gives some energy
to the market," said Hans Peterson, global head of asset
allocation at SEB Investment Management.
The stronger European stock market failed to lift the euro,
which dipped to a two-week low of $1.3783, although it
remained close to its strongest levels this year.
European Central Bank executive board member Benoit Coeure
said on Tuesday that the strength of the euro could be keeping
inflation too low and that there was further margin to reduce
the main interest rate below 0.25 percent.
The comments were the latest in a series of efforts by ECB
policymakers, including President Mario Draghi, to talk down the
euro currency as they try to fight ultra-low inflation and keep
the currency union's economic recovery on track.
Euro zone inflation is running at 0.5 percent, far below the
ECB's target of just under 2 percent over the medium term,
keeping speculation rife that the ECB may soon turn on the money
printing presses and launch a programme of asset purchases.
Business sentiment surveys such as the euro zone PMIs and
the German Ifo could alter those expectations this week. Draghi
is also due to give a keynote speech in Amsterdam on Thursday.
"Euro/dollar is likely to trade with a weaker bias this week
given the German IFO and Draghi's speech coming up," said Yujiro
Goto, currency analyst at Nomura."
The ECB was not the only one hoping for a weaker currency.
China's yuan fell to its softest against the
dollar in 14 months, after the central bank set a lower official
midpoint of its trading range, highlighting its desire for a
weaker currency to manage an economic slowdown.
The ECB outlook is a key factor behind this year's rally in
lower-rated euro zone government bonds. Junk-rated Portugal will
sell up to 750 million euros in 10-year bonds on Wednesday in
its first bond auction since April 2011, pursuing a full return
to market financing as the end of its EU/IMF bailout approaches.
"It is part of Portugal's long road back to becoming full
market participants," said Luca Jellinek, head of European fixed
income at Credit Agricole.
Portuguese 10-year yields hit their lowest in
eight years at 3.66 percent last week, having fallen from crisis
highs of over 15 percent in the past two years.
German Bund yields, the benchmark for euro zone
borrowing costs, rose 2 basis points to 1.54 percent.
Meanwhile, investors continued to see tensions in Ukraine as
a threat to riskier assets, even though they seemed to be having
less of an impact on safe-haven currencies such as the Japanese
yen and other markets this week.
"It's ... a risk that we need to keep an eye on," said SEB's
Peterson. "For now the effect on the global GDP (gross domestic
product), trade and finance seems to be quite small."
Following a gunfight that killed at least three on Sunday,
Washington and Moscow each continued to put the onus on the
other to ensure tensions are eased.
Washington threatened to impose additional sanctions against
Russia "in days" if Russia does not implement an agreement
struck last week to avert wider conflict.
The worries over Ukraine supported oil prices. U.S. crude
futures stood at $104.10 per barrel, near a six-week high
of $104.99 hit on Thursday. Russian shares fell.
(Additional reporting by Anirban Nag, John Geddie and Sudip
Kar-Gupta in London; Editing by Alison Williams)