* Euro weakens vs dollar, options show big bias for weaker
* French bond yield spread over Germany widest since late
* Wall St set to dip after stocks gain in Europe and Asia
* Oil falls on U.S. inventories; strikes push copper higher
* Uncertainty pushes gold to three-month high
* Graphic: World FX rates in 2017 tmsnrt.rs/2egbfVh
By Nigel Stephenson
LONDON, Feb 8 Political uncertainty ahead of
European elections prompted nervous investors to sell the euro
and kept French government debt under pressure on Wednesday
while the price of safe-haven gold hit three-month highs.
U.S. stock futures pointed to a weak start on Wall Street
after shares rose in Europe and Asia.
Industrial companies' shares led the charge in Europe.
France's Vinci rose 5 percent after results reported
after the market closed on Tuesday. Vinci hiked its dividend and
forecast higher revenue for 2017.
Three months before the final round of France's presidential
election, investors are concerned about the strong showing of
far-right candidate Marine Le Pen, who has promised to take
France out of the euro zone and to hold a referendum on European
While polls suggest Len Pen would not win, several other
front runners' campaigns are in disarray.
Euro zone government bond yields fell broadly, though French
debt lagged the rest, with 10-year yields falling
3 bps to 1.1 percent but holding close to 17-month highs touched
on Monday. Low-risk German equivalents fell 5.4
bps to 0.31 percent, a two-week low.
This pushed the gap between the two yields at one point to
more than 78 bps, its widest since November 2012, also fuelled
by expectations the extent of the European Central Bank's
bond-buying stimulus scheme has peaked.
"If you step back, the big picture still remains - that of
political concerns in Europe concomitant with speculation over
ECB tapering," said Rabobank's head of rates strategy Richard
The premium investors demand to hold low-rated Italian
10-year bonds rather than German Bunds hit its highest since
Apart from German debt, investors also bought gold, which is
seen as a safe investment in uncertain times. Spot gold
hit a three-month high of $1,240.40 an ounce.
The euro currency weakened a further 0.2 percent to $1.0653
after a sharp fall on Tuesday.
Options markets show the biggest bias for euro weakness
against the dollar since late June.
The dollar, whose predicted path higher has been interrupted
lately by uncertainty over U.S. President Donald Trump's
economic policies, rose 0.2 percent against a basket of other
Investors are still waiting to see whether Trump makes good
on his campaign pledges to cut taxes and boost spending.
Against the yen, the dollar fell 0.2 percent to
112.12 yen. Sterling was flat at around $1.25 but up
0.2 percent versus the euro at 85.2 pence per euro.
"The French political noise has brought the euro down and
that has given the dollar a reprieve," said Gavin Friend, a
strategist with National Australia Bank in London.
"Markets know that if Trump was to come out and start
talking about tax reform and infrastructure spending, the dollar
would go up. The dollar rose a long way at the end of last year,
it has come back, now we are sitting around waiting for the next
In stock markets, the pan-European STOXX 600 index
rose 0.2 percent while Britain's FTSE 100 fell 0.1
MSCI's broadest index of Asia-Pacific shares outside Japan
was up 0.2 percent in late trade, after spending
most of the session in negative territory.
Japan's Nikkei rose 0.5 percent.
Oil prices fell after American Petroleum Institute data on
Tuesday showed a larger-than-expected rise in U.S. crude
inventories and after signs of slowing demand growth in China.
"The API delivered a Goliath crude inventory number ... The
second-highest on record. The reaction was predictable, as the
herd, already nervous from the previous day's price action,
turned en masse and ran off the cliff," said Jeffrey Halley of
futures brokerage OANDA in Singapore.
Brent crude last traded at $54.88 a barrel, down 17
Copper prices rose 2 percent to just above $5,900 a tonne
after the world's biggest mines said they planned to cut output
due to strikes and other issues.
BHP Billiton said it would halt output at Chile's Escondida
mines, the world's biggest, and Freeport-McMoRan warned it would
scale back activities at its Indonesian mine.
For Reuters Live Markets blog on European and UK stock
markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets
(Additional reporting by Hideyuki Sano in Tokyo, Henning
Gloystein in Singapore, Jamie McGeever, Abhinav Ramnarayan and
Patrick Graham in London; Editing by Catherine Evans)