U.S. stock index futures edged higher on Monday as merger activity and expectations for solid earnings overshadowed concerns about the possible spread of unrest in Egypt to other parts of the Middle East.

Alpha Natural Resources said on Saturday it agreed to a $7.1 billion deal to buy Massey Energy Co, which was rocked by a deadly coal mining accident last year.

Massey shares jumped 12.5 percent in premarket trading to $64.40 while Alpha Natural slid 6.2 percent to $54.30.

Warehouse and distribution center owner AMB Property Corp and rival ProLogis said they would merge, one of the biggest real estate deals since the financial crisis.

But fears hung over the markets of political unrest spreading to oil-producing Middle East countries, driving up crude prices and threatening global growth prospects.

Protests to end the 30-year rule of President Hosni Mubarak continued over the weekend, heightening risk aversion for European investors already concerned by their own region's sovereign debt crisis and inflation.

U.S. stocks suffered their biggest one-day loss in nearly six months on Friday, preventing the Dow from notching its longest weekly winning streak since 1995.

It appears the political situation is going to get worse before it gets better and during that short period of time anything could happen, said Peter Cardillo, chief market economist at Avalon Partners in New York.

It's a fear factor and until this thing is resolved one way or the other, it is going to cause the markets to be jittery. We could expect a bumpy ride, notwithstanding good economic news and good earnings.

Exxon Mobil Corp is set to release fourth-quarter earnings, with profits expected to rise more than 30 percent. [nN30169616]

Other companies due to report include Anadarko Petroleum Corp., Gannett, Illinois Tool Works Inc and Eastman Chemical Company.

Economic data on tap for Monday includes personal income and spending for December and the Institute for Supply Management-New York release of the January index of regional business activity at 8:30 a.m.. The Chicago PMI for January is due out at 9:45 a.m..

S&P 500 futures rose 4.2 points and were above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures rose 22 points, and Nasdaq 100 futures rose 7 points.

In other M&A action, CNOOC Ltd will pay $1.3 billion in its second shale deal with America's Chesapeake Energy Corp, the latest move by China's top offshore oil producer in its aggressive drive for overseas acquisitions. [nN30170001]

* European shares fell in early trade on Monday on concern that unrest in Egypt could spread.

* In Asia, Japan's Nikkei share average finished 1.2 percent lower and at one point hit its lowest since early December over Middle East concerns.

(Reporting by Chuck Mikolajczak; Editing by Kenneth Barry)