Asian stocks tread water on U.S. cues, Europe concerns

HONG KONG (Reuters) - Asian stocks looked set to consolidate around four-month highs on Thursday as a cautious Wall Street close and growing political risks in Europe force investors to the sidelines.

MSCI's broadest index of Asia-Pacific shares outside Japan was broadly flat, with early Asian markets such as Australia <.AXJO> hemmed in tight ranges.

New Zealand stocks <.NZ50> edged higher after the central bank signalled that a further cut in interest rates was no longer likely, but also that any tightening in policy might be two years or more away.

Political concerns, including a strong showing by far-right candidate Marine Le Pen in France's presidential race, have pushed up premiums demanded by investors to buy French debt over comparable bonds and pushed the yen and U.S. Treasuries higher.

"The market is clearly pricing in a degree of uncertainty around the French elections, although that's not to say that the market is pricing in some type of shock political outcome," James Woods, global investment analyst at Rivkin Securities in Sydney, wrote in a note.

The S&P 500 ended slightly higher on Wednesday as investors digested mixed earnings reports, while the Dow Jones Industrial Average slipped as bank stocks weighed.

Cautious stock markets translated into another day of gains for bonds with 10-year U.S. benchmark bond yields declining for a third consecutive day to 2.34 percent, the lowest level in three weeks.

Falling yields on U.S. debt had little impact on the greenback which showed further signs of extending gains after plateauing last week.

Against a broad trade-weighted basket of its rivals <=USD>, the dollar was trading at 100.20 compared to a level of 99.30 last week. The Japanese yen also held its ground thanks to a broad rush to safety.

In commodities, copper prices rose after the world's top two mines said strikes and permit delays would force them to cut output. Helping sentiment was a recent pickup in China's production price index to its highest levels since September 2011.

Oil prices held firm after investors covered short positions on Wednesday. Brent crude futures settled at $55.16 per barrel, up 0.2 percent.

(Reporting by Saikat Chatterjee; Editing by Richard Pullin)