* 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
"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
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
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
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
Gold posted gains on Monday in spite of a stronger dollar versus the euro. Spot gold prices
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)