* U.S. stocks soar on AT&T's T-Mobile deal
* U.S.-traded Nikkei futures advance
* VIX posts largest daily drop since May
* Euro touches $1.42 vs USD on rate hike expectations
(Updates prices, adds VIX, changes quotes)
By Rodrigo Campos
NEW YORK, March 21 (Reuters) - Stocks in major world
markets rallied on Monday as the appetite for riskier assets
returned following some progress in resolving Japan's nuclear
plant crisis, while the yen slipped on speculation of further
market intervention.
Japan's markets were closed for a holiday, but the MSCI
index of Asian stocks outside of Japan <.MIAPJ0000PUS> rose 1.4
percent.
The yen fell on investor concerns over more coordinated
actions by the world's major central banks to weaken the
Japanese currency following last week's intervention by the
Group of Seven.
Oil prices were slightly higher after a second round of
U.N.-mandated airstrikes on Libya and after spreading protests
in the Middle East reinforced concerns about potential supply
disruption.
In a sign of some normalcy returning to the markets
following the Japanese earthquake, tsunami and nuclear plant
crisis, Wall Street's fear gauge posted its largest daily drop
since May.
U.S. stocks were up about 1.5 percent on Monday afternoon
in New York as investors welcomed AT&T Inc's <T.N> $39 billion
offer to buy T-Mobile USA from Deutsche Telekom in what would
be the world's biggest deal this year and Germany's biggest in
a decade.
The Dow Jones industrial average <> was up 186.78
points, or 1.58 percent, at 12,045.30. The Standard & Poor's
500 Index <.SPX> was up 19.54 points, or 1.53 percent, at
1,298.74.
"Any sort of M&A activity has a beneficial impact on the
market as a whole because it gives the impression corporate
insiders see value in the market," said Thomas Villalta,
portfolio manager for Jones Villalta Asset Management in
Austin, Texas, which he said has a small holding in telecom
services.
The gains in U.S. stocks for a third day followed two weeks
of losses over concerns about unrest in oil-producing North
Africa and the Middle East. Japan's earthquake and tsunami and
the ensuing nuclear crisis deepened investors' concerns about a
continued global economic recovery.
"More incrementally positive news from Japan in terms of
the nuclear situation is helping the market," said John
Canally, investment strategist at LPL Financial in Boston.
The CBOE volatility index <.VIX> tumbled 15.8 percent in
its largest daily percentage drop since last May.
It fell below its 14- and 200-day moving averages for the
first time since the earthquake in Japan.
The FTSEurofirst 300 <> index of top European shares
rose 1.7 percent to hit a one-week high and the MSCI world
share index <.MIWD00000PUS> jumped 1.5 percent, the largest
daily gain in seven weeks.
Experts said Japan's reconnection of power to its
earthquake-damaged reactors is a major step in managing its
nuclear crisis but two smoking reactors and worries about food
safety showed the crisis was far from over. For details, see
[]
Equities got a boost after billionaire investor Warren
Buffett said the earthquake and tsunami are the kind of
extraordinary events that create a buying opportunity for
shares in Japanese companies. []
U.S. dollar-denominated Nikkei futures <NKc1> rose 3.0
percent and have gained roughly 11 percent in the last three
sessions.
YEN SLIPS, EURO HITS 4-MONTH HIGH
The yen added to losses, with speculators wary of more
coordinated actions by top central banks after joint G7
intervention last week hoisted the greenback nearly 4.0 percent
versus the Japanese currency. The U.S. dollar rose 0.2 percent
for the day to 80.97 yen <JPY=>.
The euro <EUR=> rose above $1.42 against the U.S. dollar
for the first time since November as markets braced for a euro
zone interest rate hike as soon as next month.
A measure of the greenback against a basket of major
currencies fell to its lowest in 15 months.
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Libya Graphics
http://link.reuters.com/neg68r
Japan disaster in figures
http://r.reuters.com/ser58r
Japan disaster Top News page
[]
Picture, graphic packages:
http://r.reuters.com/wyb58r
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OIL PRICES FIRMER
Brent crude for May delivery <LCOc1> was up more than 80
cents at $114.76 a barrel after the attacks on Libya, aimed at
protecting civilians caught up in a revolt against the nation's
leader, Muammar Gaddafi. []
Brent has risen nearly 22 percent this quarter, with prices
buoyed by uncertainty over the unrest in North Africa and the
oil-producing Gulf region.
Oil traders have been also following Japan's crisis
closely.
"Concerns about demand in Japan were raised when smoke
started coming from one of the reactors, pulling crude off the
early highs. It's negative psychology for the market," said
Phil Flynn, analyst at PFGBest Research in Chicago.
U.S. Treasuries prices were hurt by reduced safe-haven
demand and extended losses after the Treasury said it will
begin to sell $142 billion of its agency-guaranteed
mortgage-backed securities. []
Benchmark 10-year notes <US10YT=RR> were last down 10/32 in
price to yield 3.30 percent, up from 3.28 percent late Friday.
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* For Reuters Global Investing Blog click on
http://blogs.reuters.com/globalinvesting
* For the MacroScope blog http://blogs.reuters.com/macroscope
* For hedge fund blog http://blogs.reuters.com/hedgehub
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(Additional reporting by Wanfeng Zhou, Caroline Valetkevitch,
Karen Brettell, Robert Gibbons and Alejandro Barbajosa)
