GLOBAL MARKETS-Europe rattled by Italy stress, safe havens keep gaining

* Italian stocks slump 2.2% 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 at eight-month high

By Marc Jones
LONDON, Aug 9 (Reuters) - Trade war worries and the prospect
of early elections in Italy and Britain hit European markets on
Friday, while the week's 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 was then led lower by 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 when Salvini – who's publicly insisted the government
would last its full five years – pushed for a new poll.
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
"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. London's FTSE and the pound were under strain, too, after
the UK reported its economy shrank in the second quarter, the
first contraction in seven years That followed reports on Thursday that the new UK Prime
Minister, Boris Johnson, was planning for an election after an
Oct. 31 Brexit Those reports had shoved sterling
to a two-year low against the euro. 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 didn't look much brighter. They
were down as much as 0.5% in Europe, although the S&P 500 had
had its best session in two months on Thursday. .N
MSCI's broadest index of world shares, which tracks 47
countries, was 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
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 held most of the previous day's gains as well, on
expectations of more production cuts by OPEC. O/R
Brent crude LCOc1 hovered at $57.32 per barrel. U.S. West
Texas Intermediate CLc1 crude fell 0.1% to $52.50. Worries
about the global economy meant Brent was down over 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."