(Adds Yahoo deal, Wall Street outlook)
By Jeremy Gaunt, European Investment Correspondent
LONDON, Feb 1 (Reuters) - European shares rose sharply and
Wall Street looked set for a bullish start on Friday as
investors digested news of major corporate deals and kept focus
on pending U.S. job data.
The dollar was weaker and demand for government bonds
slipped.
Software giant Microsoft Corp <MSFT.O> said it had offered
to acquire internet media company Yahoo Inc <YHOO.O> in a
proposed cash and stock deal valued at $44.6 billion.
Chinese aluminium company Chinalco had early announced it
had bought a 12 percent stake in miner Rio Tinto <RIO.L> jointly
with U.S. producer Alcoa <AA.N>.
Both announcements lifted European shares. The pan-European
FTSEurofirst 300 index <> was up 1.7 percent.
U.S. jobs data due at 1330 GMT, however, hovered in the
background.
"Later on, top down numbers to be released for the U.S. will
be setting the tone ... Obviously the January labour market
report will be of most importance," said Heino Ruland, analyst
at FrankfurtFinanz.
The non-farm payrolls release is expected to show a median
80,000 new U.S. jobs created in the month, compared with 18,000
in December, according to economists polled by Reuters.
Investors will be looking to see whether the data is better
or worse than expected in relation to the U.S. economy's slide
toward recession.
"Anything under 100,000 will fit the macro picture as we
know it," said Nomura rate strategist Charles Diebel.
Earlier, Japan's Nikkei index <> closed down 0.7
percent in part because of position squaring by investors wary
of the data.
WAITING FOR JOBS
The dollar held steady within a cent of record lows against
the euro and at weak levels against other major currencies, as
traders bided time ahead of the U.S. data.
"There's a lot of uncertainty on this number. You just have
to see the wide range of forecasts. You need to see something
pretty strong to boost the dollar short term -- in the region of
155,000. Anything below that, I doubt we'll see too much
(dollar-positive) reaction," said Mitul Kotecha, head of global
FX strategy at Calyon in London.
The dollar was down against a basket of major currencies,
near a two-month low touched on Thursday.
The euro was steady on the day at $1.4894 <EUR=>, eyeing a
move above $1.49 toward the record high of $1.4966 and the
psychological target of $1.50.
Euro zone government bonds slipped following Thursday's
rally on the U.S. Federal Reserve's second rate cut in just over
a week, a total of 125 basis points altogether.
Two-year yields <EU2YT=RR> were 2.7 basis points higher at
3.409 percent, while 10-year yields <EU10YT=RR> were 1.2 basis
points higher at 3.945 percent.
