By Jamie McGeever
LONDON (Reuters) - European shares clawed their way to an eight-year high on Wednesday, driven by a $70 billion mega-deal in the oil and gas sector that added to a flurry of merger and acquisition activity that has gripped investors this week.
Shares in BG Group surged 45 percent after Royal Dutch Shell agreed to pay that amount (47 billion pounds) for its smaller rival, making it the biggest deal in the sector in more than a decade.
At midsession in Europe the EuroFirst 300 index of leading shares was up 0.2 percent at 1,616 points, having earlier touched an eight-year high of 1617.88 points.
Following Tuesday's 1.6 percent rise, the biggest gain since Jan. 23, the market is on track for its ninth weekly rise in ten.
Britain's FTSE 100, of which energy shares are a major component, was up 0.6 percent at 7,002 points. Shares in Shell fell 2 percent but BP was up more than 3 percent.
"Our initial opinion is quite cautious, given the industry's track record in destroying shareholder value. However, in the long term, the combined group will benefit from being the second largest oil and gas company," said Iain Armstrong, equity analyst at Brewin Dolphin.
"Ultimately, we think that they will succeed and there will be one less company for analysts to follow," he said.
Germany was the main exception in Europe, with shares slipping after data showed that industrial orders unexpectedly fell in February.
In other M&A activity, Vivendi is looking at a possible acquisition of pay-TV group Sky, three sources familiar with the matter told Reuters, in a deal that could cost the French media conglomerate up to 28 billion pounds.
Following FedEx Corp's 4.4 billion euro ($4.8 billion) bid to buy Dutch package delivery company TNT Express on Tuesday, investors shunned the temptation to cash in on a decent run for Europe's main indexes in recent days.
Earlier in Asia, Japanese stocks rose 0.8 percent to a fresh 15-year high after the Bank of Japan's latest policy meeting. Some investors were disappointed no fresh stimulus was announced, but with inflation near zero expectations are high that more will come at its next meeting.
Hong Kong and Chinese markets both hit seven-year peaks, while MSCI's broadest index of Asia-Pacific shares outside Japan gained 1.2 percent to its highest since mid-September.
Futures pointed to a slightly higher open on Wall Street too.
FED MINUTES IN FOCUS
The Shell-BG deal also filtered through to currencies, with sterling the big winner, rising almost 1 percent against the dollar to $1.4950. That was roughly double its gains on the euro, because Shell's debt is mostly dollar-denominated, analysts said.
The dollar took a breather across the board after rising more than 1 percent on Tuesday, its biggest gain in almost a month.
The euro rose 0.5 percent to $1.0867 and the greenback fell 0.4 percent against the yen to 119.76 yen.
Markets continue to readjust expectations on the likely timing of the Federal Reserve's first interest rate hike since June 2006. Last Friday's weak jobs report for March prompted many observers to strike June off as a potential date.
Minutes from the Fed's last policy meeting released later on Wednesday will be scrutinised closely for clues on the timing, which is becoming increasingly uncertain.
"While our central forecast of actual policy remains lift off at the September meeting, this is now a close call versus December," Goldman Sachs's U.S. economist Jan Hatzius said in a note.
The benchmark 10-year U.S. Treasury yield was one basis point lower on Wednesday at 1.87 percent, while the comparable German yield was two basis points lower at 0.16 percent after the 0.9 percent fall in German industrial orders in February.
Earlier, Germany sold two-year bonds at a record low yield of -0.28 percent, while Switzerland sold 10-year bonds at auction with a negative yield.
Greece, meanwhile, raised 1.14 billion euros at an auction of six-month Treasury bills, moving the full amount on offer in the first of two sales this month as it tries to roll over debt and navigate its way through a cash crunch.
Greek Prime Minister Alexis Tsipras met with Russian president Vladimir Putin on Wednesday but did not ask for financial aid, a Greek government spokesman said. [ID:nL5N0X50XJ]
Greece is due to due to repay a loan tranche of around 450 million euros to the International Monetary Fund on Thursday.
In commodities, U.S. crude oil fell 2.5 percent to $52.71 a barrel while Brent shed 1.6 percent to $58.14.
Gold got a boost from the weaker dollar and edged up a couple of bucks to $1,211 an ounce.
(Additional reporting by Sudip Kar-Gupta; Editing by Hugh Lawson; To read Reuters Global Investing Blog click on http://blogs.reuters.com/globalinvesting; for the MacroScope Blog click on http://blogs.reuters.com/macroscope; for Hedge Fund Blog Hub click on http://blogs.reuters.com/hedgehub)
