* Italian stocks slump 2.4% on snap election worries
* U.S. may delay permitting companies to trade with Huawei
* Yuan stabilizes, Chinese stocks fall after soft data
* Gold at six-year high, best week for three years
* Japanese yen near eight-month high
* Brexit, UK recession worries punish the pound
By Marc Jones
LONDON, Aug 9 (Reuters) - Trade war worries and the prospect
of early elections in Italy and Britain hit European markets
hard on Friday, while the search for safety left gold on course
for its best week in three years, Japan's yen near an
eight-month high and bonds surging.
A turbulent week dominated by a symbolic drop in China's
currency was not finished yet. A report that
Washington was delaying a decision about allowing some trade
between U.S. companies and Huawei again spooked Asia
Europe then plunged lower due to a 2.4% slump in Italian
stocks .FTMIB after Matteo Salvini, the leader of one of the
country's ruling parties, the League, pulled his support for the
governing coalition on Thursday. .EU
Snap elections have been likely for months, but markets were
jarred by the speed at which Salvini – who had previously
insisted the government would last its full five years – pushed
for a new poll.
"Those who waste time hurt the country," the League said in
a statement as it presented a no-confidence motion to the Senate
in Rome. Investors dumped Italian government debt, pushing yields --
which move inversely to prices -- on Rome's 10-year bonds up 26
basis points to 1.8%, the biggest daily increase in over a year.
IT10YT=RR GVD/EUR
London's FTSE and the pound were under heavy strain, too,
after Britain reported its economy shrank in the second quarter,
the first contraction in seven years That followed reports on Thursday that the new British Prime
Minister, Boris Johnson, was planning for an election after an
Oct. 31 Brexit It all shoved sterling to a
two-year low against the euro and a 2-1/2 low versus the dollar.
GBP/
"It has been a very volatile week," said Elwin de Groot,
Rabobank's head of macro strategy.
"Until recently, the markets' view was that this trade war
will be resolved, but clearly now the thinking is that maybe
this is not the case and it could be accelerating from here,"
and Italy and Brexit worries are now adding to that, he said.
U.S. stock futures ESc1 did not look much brighter either.
They were down as much as 0.6% in Europe as the Huawei jitters
knocked some of the tech names, although the S&P 500 had had its
best session in two months on Thursday. .N
MSCI's broadest index of world shares .MIWD00000PUS , which
tracks 47 countries, was back in the red too and headed for its
second straight week of declines after one of its worst days in
years on Monday.
Asia ex-Japan .MIAPJ0000PUS had ended down 2.3% for the
week after data showed China's first decline in producer prices
in three years, compounding the Huawei disappointment
According to Bank of Americal Merrill Lynch's number
crunchers, $3.5 trillion has been wiped off the value of global
equity markets over the past week, while Monday's rout triggered
the 12th biggest withdrawal from stocks funds ever to the tune
of $12.4 billion.
GOLD RUSH
The offshore yuan managed to hold steady, even after China's
central bank set its daily midpoint fixing CNY=PBOC at 7.0136
per dollar, the weakest since April 2, 2008.
The yen meanwhile rose as much as 0.4% against the dollar to
105.70 yen, virtually an eight-month high.
"The news about Huawei triggered the rise in the yen," said
Junichi Ishikawa, senior foreign exchange strategist at IG
Securities. "This is a reminder that the U.S.-China trade
dispute remains a risk, and this risk is not receding."
Other safe havens also gained. Gold XAU= rose back above
$1,500 on Friday, its highest in more than six years, en route
to its best week since April 2016.
Oil prices made it two days of rises, on expectations of
more production cuts by OPEC. O/R
Brent crude LCOc1 clambered back above $58 per barrel and
U.S. West Texas Intermediate CLc1 made it past $53. Worries
about the global economy hoever meant Brent was down 6% for the
week and WTI more than 5%.
"The trade spat is driving the market crazy," said Jigar
Trivedi, commodities analyst at Mumbai-based Anand Rathi Shares
& Stock Brokers. "$1,500 (for gold) is now the new normal unless
trade relations take a turn in a right direction."
BAML had noted that a mass $2.3 billion pile into gold funds
over the last week had been the fourth largest inflow ever.
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