* M&A activity supports global shares
* Wall Street opens higher
* Euro slips back after hitting multi-month highs
* Oill hits 2-1/2-year highs on Middle East unrest
(Updates with Wall Street open, prices; changes byline,
dateline previously LONDON)
By Leah Schnurr and Jeremy Gaunt
NEW YORK/LONDON, April 4 (Reuters) - Merger and acquisition
activity helped lift global equities on Monday, though Wall
Street struggled to maintain gains in early trade
Crude oil prices hit 2-1/2-year highs as the unrest in
Libya continued to unnerve investors.
Expectations that the European Central Bank will raise euro
zone interest rates at its meeting on Thursday drove the euro
briefly to an 11-month high against the Japanese yen, but later
slipped because expectations of higher rates have already been
priced in.
World stocks as measured by MSCI <.MIWD00000PUS> were up
0.6 percent, rising to the highest level in more than a month
and up more than 5 percent for the year to date.
In the latest acquisition news, Pfizer Inc <PFE.N> rose 0.8
percent to $20.54 after the drugmaker agreed to sell its
Capsugel unit, the world's largest maker of hard capsules, to
private equity firm KKR & Co <KKR.N> for nearly $2.4 billion.
And in Europe Belgian chemicals group Solvay <SOLB.BR>
launched a bid for French rival Rhodia <RHA.PA> , driving up
Rhodia's shares 48 percent. For details, see []
Vodafone <VOD.L> rose after selling its 44 percent stake in
France's second biggest telecom operator SFR to Vivendi
<VIV.PA>. []
On Wall Street the broad S&P 500 <.SPX> faced levels where
selling has clustered in recent sessions, hovering just above
1,333, a level that it has been unable to close above since
mid-February.
The Dow Jones industrial average <> was up 11.88
points, or 0.10 percent, at 12,388.60. The Standard & Poor's
500 Index <.SPX> was up 0.91 points, or 0.07 percent, at
1,333.32. The Nasdaq Composite Index <> was down 1.51
points, or 0.05 percent, at 2,788.09.
On Friday, the S&P recorded its best two-week period since
December, and the Dow industrials <> hit the highest
intraday level since June 2008.
European stocks added to three-week highs hit Friday with
a 0.2 percent rise for the FTSEurofirst 300 <>. Japan's
Nikkei <> closed up 0.1 percent.
The improving macroeconomic backdrop has been primarily
responsible for the bounce-back in equities after tumbling in
March on Japan's disaster and unrest in North Africa and the
Middle East.
The economic growth improvement has cemented expectations
that the ECB will raise interest rates Thursday and led to
speculation the U.S. Federal Reserve may be getting closer to
withdrawing exceptional liquidity. []
"As the economy turns the corner and gets back on its feet,
central bankers are beginning to see inflation as a greater
threat than lack of growth," said Jonathan Sudaria, dealer at
Capital Spreads.
RATES DRIVE EURO
Reflecting expectations of differing rate paths, the euro
hit 11-month highs against the yen and touched a five-month
peak against the dollar. The single currency later slipped back
with expectations of an increase in rates already priced in by
investors.
In contrast to the ECB, the Bank of Japan is likely to
downgrade its economic assessment at its meeting Wednesday and
may consider finding more ways to help the economy recover from
last month's massive earthquake and devastating tsunami.
Key euro-priced bank-to-bank lending rates hit new 21-month
highs Monday, boosted by rate hike expectations.
[]
The euro briefly popped above 120 yen <EURJPY=R> for the
first time since May 2010 and was later at 119.55 yen. It hit a
five-month high against the dollar of $1.4269 and was later at
$1.42138 <EUR=>.
"I think the euro is close to putting in a top now as the
monetary policy divergence story is almost fully priced," said
Lee Hardman, currency strategist at BTM-UFJ.
There was little respite for the euro zone periphery's bond
sector with Fitch cutting Portugal's credit ratings by three
notches to BBB-minus late Friday, one notch above junk, and
signaling further downgrades are likely.
Traders also said Spanish Prime Minister Jose Luis
Rodriguez Zapatero's decision not to seek a third term in 2012
elections would raise questions over Madrid's future commitment
to economic reforms.
In commodities markets, North Sea Brent crude oil hit a
2-1/2-year high of almost $120 a barrel on Monday as the unrest
in the Middle East and North Africa kept the focus on oil
supplies as economic growth bolstered demand for fuel.
"The focus remains on headlines out of the Middle East,"
said Edward Meir, senior commodity analyst at brokers MF
Global, despite what he called a "less-than-compelling
fundamental backdrop."
ICE Brent <LCOc1> rose $1.25 to a high of $119.95 a barrel,
its highest since August 2008, before slipping back to trade
around $119.70 by 1345 GMT. U.S. crude <CLc1> was up 20 cents
at $108.14 a barrel by 1345 GMT, after touching $108.78 earlier
in the session, its highest since September 2008.
Analysts say the loss of oil from Libya has been more or
less offset by Saudi Arabia, while the Japanese crisis should
also reduce oil import demand, suggesting "there likely is a
statistical surplus in the system right now", Meir said.
(Reporting by Leah Schnurr; Additional reporting by Kirsten
Donovan, Neal Armstrong, Ian Chua and Masayuki Kitano; Editing
by Leslie Adler)
