Benetton denies Inditex merger report

Benetton Group denied a report on Tuesday of preliminary merger talks with Inditex , the world's largest clothing retailer, which had boosted the shares of the Italian company.

At 1145 GMT, shares in the Italian maker of colourful sweaters, which reports preliminary 2011 earnings later on Tuesday, were up 10 percent, after rising strongly the day before.

"Shares are up on the rumours about Inditex, certainly not about the results figures they're publishing later today, which won't be good," a Milan-based analyst said.

Analysts expect the Italian retailer to suffer from lower margins and higher inventory levels, as the euro zone debt crisis and unseasonably warm autumn weather squeezed demand.

On Tuesday a news website reported speculation from indirect sources about "preliminary talks" with Inditex regarding a merger plan with Benetton.

"We categorically deny the report," a Benetton spokesman said.

Inditex, owner of the Zara brand, declined to comment on the report.

Benetton is expected to join Inditex and Hennes & Mauritz , the world's No 2 clothing retailer, in highlighting weaker spending in the euro zone.

Disposable incomes in Europe have been hit by government austerity measures and concerns over a recession this year.