* 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 (Reuters) - 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 Roche)