GLOBAL MARKETS-Stocks gain on M&A activity, lifting oil prices

                                
 * U.S., European stocks rise on increased M&A activity
                                
 * Crude oil rises above $67 a barrel on merger deals
                                
 * Yen comes off 8-month high versus dollar; euro slips
                                
 * 30-year bonds rise on low-inflation view
 (Updates with U.S. markets activity, changes byline, dateline;
previous LONDON)
                                
 By Herbert Lash
                                
 NEW YORK, Sept 28 (Reuters) - Global stocks and oil surged
on Monday after the announcement of several billion-dollar
mergers boosted confidence in a global recovery and led
investors to buy riskier assets after last week's sell-off.
                                
 Oil rose more than 2 percent to above $67 a barrel as
equity markets jumped and news emerged that Iran was
test-firing missiles. For details see: [ID:nSYD437262].
                                
 U.S. stocks rallied after three straight days of losses
last week and European shares rose sharply, snapping a two-day
losing streak. [ID:nN2869023] [ID:nLS288087]
                                
 A rise in merger and acquisition activity is considered
bullish as it suggests companies are more optimistic about the
economy and see value in the market. Increased economic
activity would spur energy demand.
                                
 Abbott Laboratories <ABT.N> said it would buy the drugs
unit of Solvay <SOLB.BR> in a 4.5 billion euros ($6.6 billion)
deal, and Xerox Corp <XRX.N>, in its biggest acquisition ever,
plans to buy Affiliated Computer Services Inc <ACS.N> for $6.4
billion in cash and stock. [ID:nLS426471] [ID:nN28526962]
                                
 "It's a sign that it's getting back to normal and companies
are trying to be quick off the mark," said Mark Bon, a fund
manager at Canada Life in London.
                                
 "If you have access to financing at the moment, then the
cost of acquisition is quite low because you can buy into a
company on low valuations," Bon said.
                                
 At 1 p.m. (1700 GMT), the Dow Jones industrial average
<.DJI> was up 135.74 points, or 1.40 percent, at 9,800.93. The
Standard & Poor's 500 Index <.SPX> was up 17.61 points, or 1.69
percent, at 1,061.99. The Nasdaq Composite Index <.IXIC> was up
44.32 points, or 2.12 percent, at 2,135.24.
                                
 The U.S. dollar pared its losses against the yen, pushing
the Japanese currency off an eight-month high, after Japan's
finance minister appeared to tone down comments suggesting he
was comfortable with the currency's strength. [ID:nN28540660]
                                
 The dollar rose against the euro and was flat against a
basket of currencies as U.S. stocks surged.
                                
 The U.S. currency and equity markets have moved conversely
of late as optimism about an economic recovery has prompted
investors to scoop up higher-yielding assets.
                                
 The dollar was up against a basket of major currencies,
with the U.S. Dollar Index <.DXY> up 0.14 percent at 76.92.
                                
 The euro <EUR=> was down 0.48 percent at $1.4615, while
against the yen, the dollar <JPY=> was down 0.22 percent at
89.43 yen.
                                
 Bets that inflation will remain low put a damper on the
price of most U.S. and euro zone government debt. U.S. 30-year
Treasury bonds rose in price. [ID:nN2882888] [ID:nLS35604]
                                
 "There's no inflation, and people are catching on to that,"
said Glen Capelo, co-head of rates at BroadPoint Capital in New
York.
                                
 The benchmark 10-year U.S. Treasury note <US10YT=RR> was
unchanged in price to yield 3.32 percent.
                                
 However, the rally in stocks and anxiety over how soon the
Federal Reserve will tighten U.S. monetary policy curbed buying
in short-dated U.S. government debt.
                                
 German consumer prices fell faster than expected in
September, with the consumer price index falling 0.3 percent
annually. [ID:nBAF001802]
                                
 In European Parliament testimony, European Central Bank
President Jean-Claude Trichet said inflation is expected to
remain subdued but in positive territory over the medium term.
[ID:nLS314160]
                                
 The 10-year Bund yield <EU10YT=RR> was almost two basis
points higher at 3.254 percent in late trade, having hit a low
of 3.213 percent. Bond yields and prices move inversely.
                                
 Iran test-fired a type of missile which defense analysts
said could hit Israel and U.S. bases in the Gulf region, state
television reported. [ID:nN25267865]
                                
 U.S. light sweet crude oil <CLc1> rose 76 cents, or 1.15
percent, to  $66.78 per barrel.
                                
 Gold posted gains on Monday in spite of a stronger dollar
versus the euro. Spot gold prices <XAU=> rose $2.45, or 0.25
percent, to $993.80 an ounce.
                                
 The Nikkei share average <.N225> shed 2.5 percent to hit a
two-month low and briefly fell below the 10,000 line.
                                
 The MSCI benchmark of Asia-Pacific shares outside Japan
<.MIAPJ0000PUS> fell 1.3 percent, while the Thomson Reuters
index for regional shares <.TRXFLDAXPU> shed 1.4 percent.
 (Reporting by Ryan Vlastelica, Leah Schnurr, Edward McAllister
and Richard Leong in New York and Dominic Lau and Ian Chua in
London; Writing by Herbert Lash; Editing by James Dalgleish)