Shares boosted by M&A activity, German data; Yen climbs

NEW YORK: Global stock markets rose on Tuesday as US stocks were boosted by news of yet another possible merger that suggested there is still room to the upside, while a pick-up in German economic sentiment supported European stocks.

The S&P 500, hovering near a five-year high, extended its seven-week winning streak. The benchmark index is already up 7 percent for the year.

Office Depot Inc, the No. 2 US office supply retailer, and smaller rival OfficeMax Inc are said to be in advanced talks to merge.

The deal would be the latest addition to more than $158 billion in US deals announced thus far in 2013. Last week, deals were reached for the acquisition of H.J. Heinz Co by Berkshire Hathaway and the sale by General Electric of its remaining stake in NBCUniversal to Comcast Corp .

In Europe, stocks posted their best finish in three weeks as stronger-than-expected German sentiment data prompted investors to return to economically sensitive sectors like autos and technology after a three-session losing streak.

Optimism that the worst of the euro zone debt crisis is over has helped German investor and analyst sentiment soar to its highest level in nearly three years this month.

In the currency market, the yen climbed after two days of losses after Japanese Finance Minister Taro Aso said he was not considering foreign bond purchases.

Further boosting the US market, Google shares rose more than 1 percent to an all-time high of $804.00.

Office Depot shares surged 9 percent to $4.99 and OfficeMax shares jumped 20 percent to $12.92. Shares of larger rival Staples Inc also shot up 10 percent to $14.19.

"Equity investors have to be encouraged by M&A, since if the number crunchers are offering large premiums, that shows how much value is still in the market," said Mike Gibbs, co-head of the equity advisory group at Raymond James in Memphis, Tennessee.

MSCI's world equity index was up 0.7 percent, though markets have been falling for two weeks since a big run-up in January.

The Dow Jones industrial average was up 45.69 points, or 0.33 percent, at 14,027.45. The Standard & Poor's 500 Index was up 8.03 points, or 0.53 percent, at 1,527.82. The Nasdaq Composite Index was up 12.18 points, or 0.38 percent, at 3,204.21.

The pan-European FTSEurofirst 300 index provisionally closed up 1.1 percent at 1,171.73 - more than recovering the previous three sessions' losses.

YEN GAINS

The yen rose after Japan's Aso said he was not considering buying foreign bonds as part of efforts to ease monetary policy, a day after Prime Minister Shinzo Abe said this was an option.

That highlighted the open disagreement between the two Japanese officials, which has somewhat muddled the outlook for the country's monetary policy and created two-way risk for dollar/yen trades.

Markets still expect Japan to ease policy aggressively -- a negative for the yen -- but the approach is less clear-cut, which could slow the currency's fall.

In addition, although Japan was not singled out at this weekend's Group of 20 meeting for monetary and fiscal measures that have resulted in yen weakness, Choi Hee Nam, director-general at South Korea's finance ministry, said Japan's policies were not endorsed by the group and did spark controversy, according to a report from Bloomberg News.

"Developments in the past few days highlight the fact that there are internal rifts on the policy approach and there may be external constraints on what sort of easing measures Japan's partners will deem acceptable," said Shaun Osborne, chief currency strategist at TD Securities in Toronto.

He added that near-term downside risks loom large for the dollar against the yen.

In midday New York trading, the dollar fell 0.5 percent to 93.55 yen, well below a peak of 94.22 yen hit on Monday after Japan escaped direct criticism from its G20 peers at the weekend. However, it remained above chart support at 93.38 yen, the 200-hour moving average.

With the dollar having risen about 20 percent since mid-November, investors have hesitated to re-test last week's 33-month high of 94.47 yen, when it failed to breach a reported options barrier at 94.50.

Tokyo has delayed nominating a new governor for its central bank by a week, fanning talk of friction between the prime minister and the finance minister on the issue.

The euro was down 0.2 percent against the yen at 125.21 yen .

Against the dollar, the euro recovered by midday to hit the day's high of $1.3394. It was last at $1.3387, up 0.3 percent in mostly choppy trading.

US Treasury debt was little changed. The benchmark 10-year US Treasury note was yielding 2.0034 percent.

Brent crude oil fell for a third session in a row on signs of lackluster European growth and easing geopolitical tensions.

Brent crude for April delivery was down 38 cents at $117 per barrel, while US crude for March added 8 cents to $95.94 a barrel.