European shares edged up to a one-week high on Tuesday, as optimism from a wave of merger deals partly offset political uncertainty in France after Prime Minister Francois Bayrou was ousted in a no-confidence vote.
The pan-European STOXX 600 (.STOXX) briefly touched a one-week high and was last up 0.08% at 552.59 points as of 0814 GMT, with basic resources (.SXPP) rising 1.5% to lead gains among sectors.
Shares of Anglo American (AAL.L) jumped 6.8% after the miner said it has agreed to merge with Canada's Teck Resources (TECKb.TO) in a $50 billion deal to form a newly combined company Anglo Teck Plc. Teck's Frankfurt-listed shares also jumped 12% on the news.
Meanwhile, France's CAC 40 index (.FCHI) climbed 0.3%, although market nervousness was more evident in the bond market as the premium investors demand to hold French 10-year debt over the benchmark 10-year German bund rose 6 basis points .
Uncertainty over France's fiscal stability sparked a eurozone bond selloff last week, with Fitch due to begin a series of credit reviews on Friday. Investors also await President Emmanuel Macron's choice of a fifth prime minister in under two years amid divisions over deficit plans.
"There is a risk of a downgrade at the September 12 meeting..." said Kiran Ganesh, multi asset strategist at UBS Global Wealth Management.
"But even if it doesn't come ... France isn't likely to solve its debt trajectory."
In Italy, Monte dei Paschi di Siena gained 4.1% after data showed that the lender secured 62% of bid target Mediobanca (MDBI.MI). Mediobanca's shares climbed 4%.
Swiss pharma giant Novartis (NOVN.S) slipped 0.6% after saying it will acquire Tourmaline Bio (TRML.O) in a deal valuing the New York-based biopharmaceutical company at $1.4 billion on a fully diluted basis. Tourmaline shares gained 56% in premarket trading in the U.S.
Later this week, investors will shift their attention to an interest rate verdict by the European central bank and the inflation data from the United States.
