German shares hit one-month high, PostNL surges

(ADVISORY- Reuters plans to replace intra-day European and UK stock market reports with a Live Markets blog on Eikon - see cpurl://apps.cp./cms/?pageId=livemarkets for site in development. See the bottom of the report for more details)

* Germany's DAX index hits one-month high

* Volumes seen thin as UK, U.S (Other OTC: UBGXF - news) . markets shut

* PostNL (Swiss: PN6.SW - news) shares advance 5.8 percent

By Atul Prakash

LONDON, May 30 (Reuters) - Germany's DAX share index climbed to a one-month high on Monday, with some investors betting that the euro's relative weakness against the U.S. dollar would underpin German exporters.

The DAX was up 0.4 percent by 0741 GMT, after hitting a one-month high, as the euro fell to a 2-1/2 month low after comments by Federal Reserve Chair Janet Yellen on Friday enhanced the prospects of a near-term U.S. interest rate hike.

Yellen said the Fed should raise interest rates "in the coming months" if the economy picks up as expected and jobs continue to be generated.

Some analysts said the market would keep a close eye on economic indicators for the market's direction in the near term.

"Although, most investors have made peace with the reality that a rate hike is coming again ... still the pulse for this argument is very much dependent on the economic data," said Naeem Aslam, chief market analyst at Think Markets.

"If the economic data doesn't confirm that the economy is in a shape to withstand another rate hike then traders may just reverse their positions."

The euro zone's blue-chip Euro STOXX 50 index rose 0.1 percent, while France's CAC was flat in percentage terms. Volumes were expected to be thin as the London and New York markets were closed for public holidays.

Analysts and fund managers said that the recent rally in European equities could fade if the currency tailwind lost momentum. A weaker euro generally makes European goods cheaper in overseas markets and improves demand.

"The return to U.S. rate hike expectations have reopend the possibility of short-term outperformance for European Stocks, but a dollar stuck in a range can hardly create a durable momentum of outperformance," said Didier Duret, global chief investment officer at ABN-AMRO Private Banking.

Among other movers, Dutch mail operator PostNL rose 5.8 percent following Belgian rival BPost (Other OTC: BPOSF - news) 's failed attempt to take over the company.

The companies said on Friday they had discussed a friendly public offer by Bpost for all of the shares of PostNL, but had eventually failed to agree terms for a deal. Some traders said that although the talks did not proceed, the approach raised the prospect of other takeover attempts in the future.

Today's European research round-up

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Mike Dolan, Markets Editor EMEA.