UPDATE 1-Fiat Chrysler, Peugeot owner PSA in talks to combine -WSJ

(Adds stock reaction, no comment from Fiat Chrysler)

Oct 29 (Reuters) - Fiat Chrysler and Peugeot owner PSA are in talks to combine in a deal that could create a $50 billion automaker, the Wall Street Journal reported on Tuesday, citing sources.

The deal could be in the form of an all-stock deal, the report said. https://on.wsj.com/36g46vq

Fiat Chrysler shares rose sharply after the report and were up more than 7% in late afternoon trading.

Fiat Chrysler and Peugeot had no comment.

Investors have speculated for several years that Fiat Chrysler was hunting for a merger partner, encouraged by the rhetoric of the company's late chief executive, Sergio Marchionne. In 2015, Marchionne outlined the case for consolidation of the auto industry, and tried unsuccessfully to interest General Motors Co in a deal.

The two automakers had discussed a combination earlier this year, before Fiat Chrysler proposed a $35 billion merger with French automaker Renault SA. (Reporting by Dominic Roshan K.L. in Bengaluru; Editing by Maju Samuel)