* Shares rise on upbeat U.S. earnings, M&A activity
* Yen falls from 7-week peak versus euro
* German economic sentiment index falls
(Updates with midday U.S. markets, comment)
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 has hovered 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.
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 midday New York trade, the Dow Jones industrial average
<> rose 132.38 points, or 1.28 percent, to 10,434.39. The
Standard & Poor's 500 Index <.SPX> gained 15.77 points, or 1.46
percent, to 1,095.15. The Nasdaq Composite Index <>
climbed 32.07 points, or 1.47 percent, at 2,213.94.
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 1.96 percent to $51.40 while Home
Depot added 4.49 percent to $28.61.
Cook warned 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.
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 []
In Europe, shares rose, with insurers among the biggest
gainers. The FTSEurofirst 300 index of top European shares
<> closed 1.1 percent higher at 1,056.54 points, ending
at its highest level in a week.
Trading volumes, however, were low due to the holiday
period, at 57 percent of its average 90-day volume on the
FTSEurofirst 300.
Insurer Aegon <AEGN.AS> rose 6.76 percent after the
European Union approved its recapitalization.
The Thomson Reuters global stock index <.TRXFLDGLPU> rose
1.19 percent and the MSCI All-Country World Index
<.MIWD00000PUS> gained 1.25 percent.
Japan's Nikkei 225 index <> fell 0.4 percent to its
lowest close in more than eight months on thin trading volumes.
[]
SOLID AUCTION
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 0.42 percent to $1.2877 <EUR=> while the
greenback rose 0.14 percent to 85.48 yen <JPY=>. Against a
basket of currencies made up of its major trading partners, the
U.S. dollar fell 0.39 percent <.DXY>.
The bond auctions overshadowed the influential German ZEW
report. Analyst and investor economic sentiment fell in August
to its lowest level since April 2009 on concerns 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 the debt
sales eased funding worries in the euro zone periphery.
[] []
The 10-year Bund yield <DE10YT=TWEB> gained 3.6 basis
points to 2.36 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 $1,225.40 an ounce, up $2.55.
Oil rose from one-month lows but concerns linger that
demand could fall. U.S. light sweet crude oil <CLc1> rose $0.99
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)
