By Jemima Kelly
LONDON (Reuters) - European share markets touched a 14-year high on Tuesday, supported by takeover talks between telecoms equipment firms Nokia and Alcatel Lucent, while a shifting global monetary policy outlook weighed on the euro.
Five weeks into the European Central Bank's 1 trillion euro bond-buying scheme, European share indices are at 14-year highs and the euro is struggling against the dollar and other major currencies.
The single currency hit a two-year low against the yen on Tuesday, after a senior Japanese official indicated the yen might have fallen too far.
The talks between Finland's Nokia and its French rival Alcatel, which could create a group worth over 40 billion euros ($42 billion), came as a surprise to markets, as reports had suggested Nokia might be interested in Alcatel's mobile networks arm rather than the entire firm.
"Buying...their wireless business would have been very suitable," said Mikko Ervasti, an analyst at Evli Bank, who rates Nokia a sell. "It now appears it's about the whole company and also includes units that are of non-core nature so that is slightly concerning."
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By 0934 Alcatel-Lucent was up 9.7 percent while Nokia was down 6.3 percent. The FTSEurofirst 300 index of top European shares was down 0.3 percent at 1,643.02, having earlier touched its highest since November 2000.
That followed a 3.7 percent jump last week, helped by further declines in an already weak euro that is seen supporting an economic recovery and boosting corporate profits.
The euro fell to as low as 126.08 yen after the comments from Koichi Hamada, an economic advisor to Japanese PM Shinzo Abe. That was its weakest since June 2013.
"Hamada's comments lead to speculation that the Japanese government is uncomfortable with rapid yen weakness," said Yujiro Goto, currency strategist at Nomura. "In the short term, it may slow down the yen's weakness against the dollar, but against the euro, we expect it to strengthen."
Against the dollar, the euro was 0.2 percent lower at $1.0546.
Greek shares reopened after a four-day holiday weekend, trading 1 percent lower. Athens on Monday denied a report it was preparing for a debt default if it did not reach a deal with its creditors by the end of the month and said negotiations were proceeding "swiftly" towards a solution.
U.S. RETAIL SALES
The main data focus was U.S. retail sales data due at 1230 GMT, watched by investors for evidence that spending is picking up after a sluggish start to the year.
An upbeat result would add to the case for rate hikes from the Federal Reserve later this year, and would support the dollar.
The greenback is back near a 12-year high against a basket of major currencies, having recovered after losing as much as 4 percent in the aftermath of a much weaker-than- expected jobs report at the start of the month.
Earlier in Asia, Chinese shares had struggled to build on seven-year peaks a day before the country updates on economic growth, while much of the rest of Asia took a breather after recent hefty gains.
MSCI's broadest index of Asia-Pacific shares outside Japan eased 0.3 percent to 512, shying away from September's top of 516. A break there would take it to ground last trod in early 2008.
In commodities, crude prices rose on expectations U.S. shale oil output will record its first monthly decline in over four years, but analysts warned that the broader market remained oversupplied as China's exports rose. [O/R]
($1 = 0.9480 euros)
(Additional reporting by Anirban Nag and Francesco Canepa in London and Wayne Cole in Sydney; editing by John Stonestreet)