* Italian banks spark European stock rebound
* Yen hits 17-month high vs dollar
* German Bund yield falls to one-year low
By Jamie McGeever
LONDON, April 11 (Reuters) - World markets struggled for
direction on Monday, with renewed strength in the yen,
government bonds and gold pointing to heightened caution among
investors, but a sharp rebound in European stocks suggesting a
pent-up appetite for risk.
As the U.S. first quarter earnings season kicks off and G20
finance chiefs gear up for talks in Washington later this week
on the sidelines of the IMF Spring meetings, investors initially
chose to play safe on Monday.
Europe's main indices fell as much as 1 percent, Japan's yen
rose to a 17-month high against the dollar and Germany's 10-year
bond yield hit a one-year low.
The dollar's fall to as low as 107.61 yen prompted the
Japanese government to warn that it could take steps to weaken
the yen's exchange rate. The yen's push higher, and data showing
a 9.2 percent fall in Japan's core machinery orders in February,
helped drag the Nikkei 0.44 percent lower.
But a jump in Italian bank shares ahead of a meeting in Rome
between the country's largest lenders, the Treasury and the
central bank to set up a rescue fund then lifted European
financials and broader indices.
"A bout of risk aversion took hold in markets last week
...Uncertainty is evident again on Monday," said Jasper Lawler,
markets analyst at CMC Markets.
Europe's FTSEuroFirst 300 index of leading shares .FTEU3
was up 0.6 percent, Germany's DAX .GDAXI was up 0.9 percent,
France's CAC 40 .FCHI rose 0.6 percent and Britain's FTSE 100
.FTSE was up 0.2 percent. All had been sharply lower earlier.
European stocks have fallen for the last four weeks, and
another down week would mark their worst run in almost three
years.
European financials were up around 2 percent .SX7P , with
Italian bank shares now up 13 percent from last week's
three-year low.
Japan's Nikkei .N225 ended down 0.4 percent, but other
Asian markets drew support from lower-than-expected Chinese
consumer price inflation data which fuelled investor hopes that
Beijing will keep monetary policy loose.
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS was flat in late trading while Chinese shares
were higher .CSI300 .SSEC .
YEN IN FOCUS
The greenback's slide against the yen prompted warnings from
officials in Tokyo and put investors on alert for direct
yen-selling intervention, though many believed Japan would stay
its hand.
Japan's top government spokesman, Chief Cabinet Secretary
Yoshihide Suga, said on Monday that recent currency moves were
one-sided and speculative and that the government would take
steps as needed.
With the Federal Reserve seen as being more cautious on
hiking interest rates than some had expected, the dollar
wallowed close to lows notched last week.
The dollar was down around 0.2 percent against the yen at
107.89 yen JPY= . while the euro EUR= was up about 0.1
percent, back above $1.1400 and not far from last week's high of
$1.1454, its highest since October.
"Last week was the yen's week, and this morning, to the
extent that anything is happening, is the yen's morning too,"
Societe Generale's currency strategy team wrote in a note to
clients.
The yen has appreciated around 10 percent so far this year.
In bond markets, Germany's 10-year yield hit a one-year low
of 0.075 percent DE10YT=TWEB , bringing last year's record low
of 0.05 percent closer into view.
Analysts said that bond redemption and coupon payments this
week totalling a hefty 55 billion euros will bolster demand for
bonds that is already supported by the European Central Bank's
recently increased quantitative easing scheme.
The weaker dollar helped lift spot gold to its highest in
nearly three weeks. Gold XAU= rose to $1,254 an ounce, its
highest since March 22. It was last up about 0.7 percent at
$1,249.11.
Oil prices edged down as investors took profits after crude
soared more than 6 percent on Friday. U.S. crude futures CLc1
edged down 0.3 percent to $39.60 a barrel, while Brent crude
LCOc1 was down about 0.2 percent at $41.85.
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Shanghai CSI 300 and global effects interactive https://t.co/YqIYLIbInP
Chinese A-shares vs developed and emerging stocks http://link.reuters.com/rac25w
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