LONDON Mon Jan 12, 2015 4:14am EST

European stock markets rose on Monday, boosted by M&A activity in the healthcare sector, while oil prices showed no sign of escaping their downward spiral.

The U.S. dollar edged higher as the majority of investors who favor a stronger greenback were given a chance to reload after a weakening in the aftermath of a surprise fall in U.S. wages on Friday.

The pan-European FTSEurofirst 300 index rose 0.3 percent to 1,352.67 points after Shire Plc agreed to buy NPS Pharmaceuticals for $5.2 billion.

The euro zone's blue-chip Euro STOXX 50 index advanced 0.6 percent and Britain's FTSE 100 climbed 0.3 percent, helped by a 1.4 percent rise in Shire.

"The ongoing consolidation within the industry means the sector will remain of interest to investors," said Terry Torrison, managing director at Monaco-based McLaren Securities.

In oil markets, U.S. crude for February was down $1.11 at $47.25 per barrel and the February Brent contract was down $1.37 at $48.74 a barrel. Both hit their lowest since April 2009.

Analysts at Goldman Sachs lowered their three-month price forecast for Brent to $42 a barrel from $80 and cut U.S. crude to $41 from $70, adding it would stay near $40 for most of the first half of 2015.

Fires over the weekend at refineries in Ohio and Pennsylvania also hurt demand for crude in the United States.

DOLLAR STILL STRONG

The dollar rose 0.2 percent against a basket of currencies after falling on Friday when investors shrugged off a strong increase in U.S. payrolls, focusing on a five-cent decline in hourly wages, the biggest in at least eight years.

Friday's reaction came as markets pushed out the likelihood of a Federal Reserve interest rate hike, but the stark contrast between monetary policy in the United States and that of other big economies such as the euro zone and Japan kept the greenback in demand.

"The earnings figures may be an aberration as they don't correlate with everything else that is going on in the labor market," said Marshall Gittler, head of global FX strategy at IronFX.

U.S. 10-year T-note yields were a tad higher at 1.971 percent, having fallen as low as 1.943 percent on Friday.

In Europe, Spanish and Italian bond yields slipped after Italy's central bank chief said on Sunday the risk of deflation in the euro zone should not be underestimated. He said the best way to tackle the problem was to buy government bonds. [GVD/EUR]

The drop in the dollar helped gold nudge up to its highest in a month around $1,231 an ounce.