* Asia shares hit 18-month highs
* French yields dip below 1 pct
* Eyes on Merkel/Draghi meeting
* Safe-haven gold edges down from three-month highs
* Graphic: World FX rates in 2017 tmsnrt.rs/2egbfVh
By Nigel Stephenson
LONDON, Feb 9 Stocks rose and yields fell on
some of the euro zone's battered low-rated bonds on Thursday as
investors put aside the political risks that have dominated
markets this week.
In a difficult start to the year, investors are pondering
the impact of a new U.S. president, an unpredictable European
electoral calendar and a potential winding-down of the central
bank stimulus that has lifted risky assets across the globe.
Rising oil prices and banking stocks pushed shares
higher in Europe on a busy day of corporate earnings, while
Asian stocks hit their highest in more than 18 months.
"The stabilisation of the oil price after its recent
wobbles, together with solid earnings, for example, Soc Gen
today, is driving the positive sentiment," said Andy Sullivan,
portfolio manager with GL Asset Management UK in London.
The pan-European STOXX 600 index rose 0.5 percent.
French lender Societe Generale reported lower
fourth-quarter net income that nonetheless beat analysts'
forecasts and its shares added almost 3 percent.
MSCI's broadest index of Asia-Pacific shares outside Japan
gained 0.3 percent to their highest since July
2015, with Hong Kong, Taiwan and China
among the region's best-performing markets.
Japanese shares, however, fell 0.5 percent, a day before
Prime Minister Shinzo Abe meets U.S. President Donald Trump.
French 10-year government bond yields fell below 1 percent
for the first time in two weeks and yields on Spanish and
Italian debt fell even more sharply.
Concern over the impact of elections this year in countries
including France and Germany saw investors sell bonds of
lower-rated euro zone countries earlier this week. However,
yields, which move inversely to prices, started falling late on
Wednesday and fell further on Thursday.
"We're in an environment where political risk is pretty much
at the forefront and we're not going to get any decisive news on
that for a number of days," said Orlando Green, European fixed
income strategist at Credit Agricole.
"If the market has moved in your direction, you have to ask,
will it stay there? There is an element of people closing out of
their positions and pausing for thought."
French yields dipped 4 bps to 0.97 percent.
The premium investors demand to hold French rather than German
debt hit its highest in four years on Wednesday, three months
before the final round of a presidential election expected to
include far-right, anti-euro candidate Marine Le Pen.
A poll on Thursday showed Le Pen winning the first round
while two others said would lose the run-off.
Yields on German 10-year bonds, seen as among
the world's safest assets, edged down 0.6 bps to 0.30 percent,
meaning the French/German yield spread narrowed to 67 bps.
Apart from political risks, bond investors are pondering the
impact of the European Central Bank eventually winding down its
bond-buying stimulus scheme, which has driven down borrowing
costs in the bloc for the past two years.
ECB President Mario Draghi and German Chancellor Angela
Merkel, bidding for re-election later this year, meet on
Thursday. A number of German officials have called on the ECB to
unwind its monetary stimulus.
The euro fell 0.2 percent to $1.0682 after hitting a
two-week low of $1.0640. The yen fell 0.4 percent to
112.35 per dollar, having earlier traded as strongly as 111.70.
The dollar index, which measures the greenback against a
basket of currencies, was fractionally higher on the day.
The dollar fell on Wednesday as U.S. Treasury yields fell to
their lowest since mid-January. Investors are re-assessing how
many interest rate rises the Federal Reserve will deliver and
looking for clarity over whether Trump will make good on his
campaign pledges for tax cuts and infrastructure spending.
Ten-year Treasuries yielded 2.36 percent in
European trade on Thursday, up 1.6 bps.
Oil prices rose after an unexpected drawdown in U.S.
gasoline inventories. Brent crude, the international
benchmark, rose 36 cents a barrel, or 0.9 percent, to $55.49.
Gold dipped from three-month highs touched on Wednesday.
Spot gold fell 0.2 percent to $1,238 an ounce, compared
with Wednesday's high of $1,244.67.
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 Saikat Chatterjee in Hong Kong and
Dhara Ranasinghe and Patrick Graham in London; Editing by Andrew