* Shares rise on upbeat U.S. earnings, M&A activity
* Yen falls from 7-week peak versus euro
* German economic sentiment index falls
By Daniel Bases
NEW YORK, Aug 17 (Reuters) - Global shares prices rose on
Tuesday as two big U.S. retailers reported better-than-expected
earnings, while the euro rose for a second day after solid
demand for European bond auctions eased worries about Europe's
sovereign debt problems.
Mergers and acquisition talk also boosted shares after
mining giant BHP Billiton Ltd <BHP.AX><BLT.L> made an
unsolicited $38.6 billion takeover bid for Potash Corp of
Saskatchewan Inc <POT.TO><POT.N>.
The yen, which hovers near 15-year highs against the
greenback and seven-week peaks against the euro, gave up ground
as investors converted safe-haven cash to take advantage of
beaten down asset prices.
Spot gold prices edged up to seven-week highs while crude
oil prices rose slightly after a sell-off on Monday, benefiting
from the U.S. dollar's weak performance.
U.S. Treasury prices fell sharply after rallying on Monday
on speculative buying ahead of purchases by the U.S. Federal
Reserve, which said it is reinvesting the proceeds of its
mortgage bond holdings by buying U.S. Treasuries.
In the latest economic data, producer prices increased in
July for the first time in four months, helping to allay
concerns about deflation, but housing starts rose at a weaker
rate than expected and permits fell to their lowest point in
more than a year. [] and []
Dan Cook, senior market analyst at IG Markets in Chicago,
said markets were in a wait-and-see mode after a risk-averse
spell last week.
"The waters are way too murky at this point," he said. "We
still have a huge labor problem in this country and it's going
to be hard to get demand."
In mid-morning trade, the Dow Jones industrial average
<> rose 95.78 points, or 0.93 percent, at 10,397.79. The
Standard & Poor's 500 Index <.SPX> gained 12.77 points, or 1.18
percent, at 1,092.15. The Nasdaq Composite Index <>
climbed 26.85 points, or 1.23 percent, at 2,208.72.
Wal-Mart Stores Inc <WMT.N>, the world's largest retailer,
and Home Depot Inc <HD.N>, the top U.S. home improvement chain,
both beat analyst earnings estimates. []
[]
Wal-Mart's shares rose 2.14 percent to $51.49 while Home
Depot added 3.5 percent to $28.36.
Cook cautioned that profits driven by cost-cutting at
Wal-Mart did not demonstrate underlying strength in the
economy.
Potash, the world's largest fertilizer maker, rejected the
bid from BHP Billiton as "grossly inadequate," though its
shares surged and the bid helped boost the market.
[].
"The increase in M&A shows CEO's and CFO's have more
confidence in the outlook for the economy and are willing to
start to deploy some of the high cash balances, which have
built up in recent months," said Michael Sheldon, chief market
strategist at RDM Financial in Westport, Connecticut.
Potash's U.S.-traded stock surged 25.4 percent to $140.68.
European shares rose, led by shares of insurer Aegon
<AEGN.AS> which gained 6.7 percent after the the European Union
approved its recapitalization. The FTSEurofirst 300 <>
index of top European shares climbed 0.81 percent at 1,053.90.
The Thomson Reuters global stock index <.TRXFLDGLPU> the
MSCI All-Country World Index <.MIWD00000PUS> were up 1.2
percent.
In Japan, the Nikkei 225 index <> slipped 0.4 percent
to its lowest close in more than eight months on thin trading
volumes. []
SOLID AUCTION
In currency trading strong demand at Irish and Spanish bond
auctions helped boost the euro. Ireland's sale of 2014 and 2020
paper was viewed as a litmus test for investor appetite amid
concerns about the cost of cleaning up the country's banking
sector.
The euro rose 0.51 percent to $1.2889 <EUR=> while the
greenback rose 0.29 percent to 85.61 yen <JPY=>. Against a
basket of currencies made up of its major trading partners, the
U.S. dollar fell 0.45 percent <.DXY>.
The bond auctions overshadowed the influential German ZEW
report, which showed analyst and investor economic sentiment
fell in August to its lowest level since April 2009 on concerns
that a faltering global economic recovery would hit Europe's
largest economy.
German government bonds fell with the 10-year yield pushing
up from a record low set in the previous session after debt
sales in Ireland and Spain drew solid demand, easing worries
about the euro zone periphery. [] []
The 10-year Bund yield <DE10YT=TWEB> gained 4.1 basis
points to 2.37 percent, off an all-time low around 2.31 percent
plumbed on Monday.
Benchmark 10-year U.S. Treasuries fell 19/32 of point in
price, pushing the yield up to 2.63 percent <US10YT=RR> off
Monday's 17-month closing low of 2.57 percent.
Gold rose on the weaker dollar and expectations of further
buying by investors concerned about the stuttering pace of
recovery. Spot gold <XAU=> hit $1,228.45 -- its highest level
since July 1 -- before slipping to $1,224.90 an ounce, up
$2.10.
Crude bounced from one-month lows but concerns remained
that demand could take a beating following disappointing data
from the United States and Japan, the world's largest and
third-largest oil consumers.
U.S. light sweet crude oil <CLc1> rose $1.16 to $76.40 per
barrel.
(Additional reporting by Edward Krudy, Aiko Hayashi, Elaine
Lies, Ian Chua, Anirban Nag, Brian Gorman, Michael Taylor;
Editing by Leslie Adler)
