Asian shares rose on Tuesday as news of several multi-billion dollar takeover bids overseas boosted confidence in a global economic recovery, while the yen slid after Tokyo hinted currency intervention could be an option in some cases.

European stock futures were up 0.2 percent with markets awaiting a flood of data including UK final Q2 GDP, while U.S. equity futures were flat.

Australian shares rose to nearly their highest level in a year as M&A activity overseas on Monday, including Xerox Corp's biggest acquisition ever, was seen catching on globally.

M&A activity is coming, we're told. It's difficult to pin down but there's going to be more in the resources sector, said Bill Bishop, a private client adviser at RBS Morgan in Australia.

In Japan, the yen's retreat from an eight-month high hit on Monday helped shares of Japanese exporters, lifting the Nikkei average <.N225> by 0.9 percent.

Japan's currency came under pressure after Finance Minister Hirohisa Fujii said that intervention might be an option if currency moves were irregular, although he reiterated it was wrong for any country to try to win a competitive edge by devaluing its currency.

The yen slid to as low as 90.23 to the dollar after his comments, further pulling back from 88.22 hit on Monday, its highest level since January. Tokyo has not intervened in the market since March 2004 and analysts do not expect such a moven anytime soon.

Fujii appears to have been jolted by the yen's rapid appreciation and is worried that the strong yen would throw cold water on the economic recovery led by exports. But it is unlikely the government actually will intervene in the market, said Takumi Tsunoda, an economist at Shinkin Central Bank Research Institute in Tokyo.

A record drop in consumer prices last month highlighted that Japanese domestic demand is still weak and limited losses in Japanese government bond futures, which dipped as stocks gained.

December 10-year JGB futures were down 0.02 point at 139.29.

AUSSIE DOLLAR SHINES

The MSCI index of Asia Pacific stocks traded outside Japan <.MIAPJ0000PUS> rallied 2 percent, and is now up 60 percent this year, while the Thomson Reuters index for regional shares <.TRXFLDAXPU> was 2.4 percent higher.

Technology shares drew buying, notably in Taiwan where they traded on news that Taipei will allow contract chipmakers and flat-panel makers to acquire rivals in China, although analysts said it would be some time before the policy was implemented.

Taiwan Semiconductor Manufacturing Co Ltd <2330.TW> and UMC <2303.TW>, the world's two largest contract chip makers, rallied 4.9 percent. and 3.6 percent respectively.

China shares bucked the rise in regional stocks, dropping nearly 2 percent as investors were cautious about new listings and ahead of an eight-day national holiday starting October 1.

Investors are worried that new share supply ... will continue diverting funds from existing shares, said Gui Haoming, head of research at Shenyin and Wanguo Securities.

The Australian dollar got a lift after a senior central banker warned of a potential housing bubble, adding to expectations of an interest rate rise soon. A central bank watcher said the Reserve Bank of Australia was almost certain to raise interest rates by 25 basis points each in November and December although he did not cite any sources.

The Australian dollar was trading at $0.8742, not far off its 13-month high of $0.8790 set last week.

Robust equity markets and geopolitical tensions sparked by Iranian missile tests this week pushed oil prices up to above $67 a barrel at one point, extending a more than 1 percent gain on Monday.

Gold edged up to $992.20 an ounce but traders said investors were cautious, saying bullion may be due a slight correction.

(Additional reporting by Victoria Thieberger in Melbourne, Leika Kihara in Tokyo and Lu Jianxin in Shanghai; Editing by Kim Coghill)

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