* European M&A deals fall through
* Warren Buffett warns of market unpredictability
* French polls push yields lower
* Trump 'State of the Union' address in focus
By Jamie McGeever
LONDON, Feb 27 World stocks fell on Monday,
after two huge European merger and acquisition deals fell
through and billionaire U.S. investor Warren Buffett warned that
while stocks are cheap, they are currently unpredictable and
prone to a sudden, steep correction.
The dollar was steady and U.S. Treasury yields struggled to
bounce much from the biggest weekly fall since July, while
French bond yields hit a one-month low as polls showed centrist
Emmanuel Macron would easily beat far-right candidate Marine Le
Pen if the two face up in May's presidential election runoff.
Europe's benchmark index of leading 300 shares fell
0.2 percent to 1,456 points, led lower by insurers and exchange
operators. Assicurazioni Generali fell 3.7 percent
after bank Intesa Sanpaolo said late on Friday it had
decided not to pursue a possible tie-up with Italy's biggest
Meanwhile, the proposed 29 billion euro merger between the
London Stock Exchange and Deutsche Boerse to
create Europe's biggest stock exchange looked dead in the water
due an inability to meet European antitrust demands. Shares in
both companies fell by as much as 3 percent on Monday.
"The regulatory hurdles were always a risk, and with Brexit,
there are additional hurdles to clear that seem close to
insurmountable now," said Neil Wilson, senior market analyst at
Euro zone stocks performed better, with the index of leading
50 shares up 0.2 percent, lifted by a 0.8 percent
rise in euro zone bank stocks. Intesa Sanpaolo rose as
much as 5 percent after the bank pulled its bid for Generali.
MSCI's benchmark world stock index slipped 0.2 percent
, on course for its first consecutive daily fall
for three weeks. On Thursday, it hit a record high of 447.67
MSCI's broadest index of Asia-Pacific shares outside Japan
fell 0.3 percent, near the day's lows, while
Japan's Nikkei closed 0.9 percent lower at a 2-1/2 week
low on concerns that a stronger yen would crimp corporate
U.S. futures pointed to a flat open on Wall Street
. Though U.S. stocks clawed their way to a higher close on
Friday, major indices spent much of that day's session in
negative territory, suggesting increased caution.
It was still the Dow's 11th consecutive record high on
Friday, the longest such run since 1987, leading some to suggest
it could be prone for a correction. Warren Buffett, chairman and
chief executive of Berkshire Hathaway Inc, told CNBC on
Monday that Wall Street is unpredictable and "could go down 20
In bond markets, the focus was on France, where the latest
polls showed that centrist Emmanuel Macron would score a more
convincing victory over far-right and anti-euro Marine Le Pen in
the presidential election's runoff vote.
France's 10-year bond yield fell 2.5 basis points to a
one-month low of 0.88 percent, and the gap over
safe-haven German yields narrowed to around 70
basis points. Last week that spread reached around 84 bps, the
widest since late 2012.
Benchmark Spanish, Italian and Portuguese yields all fell
between 3 and 5 basis points.
Meanwhile, U.S. bond yields remained under pressure as
investors turn their attention to U.S. President Donald Trump's
State of the Union address on Tuesday, in which he is expected
to unveil some elements of his plans to cut taxes in his joint
address to Congress.
The 10-year U.S. Treasury yield edged up 1 basis point to
2.32 percent from Friday's five-week low of 2.31
percent. Last week's fall of nearly 11 basis points was the
steepest weekly decline since July last year.
In currencies, the dollar was flat on an index basis.
The euro was up 0.2 percent at $1.0580, but the dollar
was 0.1 percent higher against the yen at 112.30 yen and
sterling was down 0.4 percent at $1.2415.
Sterling buckled on media reports that Scottish nationalists
were preparing to demand a fresh independence vote, possibly
announcing as early as March to coincide with UK Prime Minister
Theresa May's plan to formally trigger Britain's exit from the
In addition to Trump's address to Congress, U.S. rates and
the dollar will take their cue this week from Federal Reserve
Chair Janet Yellen's speech on Friday.
"In order for the Fed to really have the option of hiking
next month, Yellen will have to make a much stronger case
relative to what's been said recently," said Deutsche Bank
market strategist Jim Reid.
In commodities, Brent crude rose 0.9 percent to
$56.48 per barrel while U.S. West Texas Intermediate was
up 0.8 percent at $54.42 per barrel as a global supply glut
appeared to ease.
(Reporting by Jamie McGeever and Dhara Ranasinghe; Editing by