Raccoon Rune is the final item needed for the quest Mind over Matter.

After obtaining a Pearl Necklace from Virginius (outdoors at the Great Market), give it to Flora at the Phoenix Inn in exchange for the rune.

Give the Raccoon Rune to Valeri on the path between the Great Market and Lanilor Lane. (You must have begun the quest Rune Handles in order for him to appear.)