Global Markets - European shares edge up as reflation trades questioned

By Jamie McGeever

LONDON (Reuters) - European shares edged up on Wednesday and gold fell as questions hung over the 'reflation' trades that had lifted markets since Donald Trump became U.S. president, while sterling held near a six-month high after Tuesday's calling of a snap UK election.

Wall Street looked set to open higher as corporate earnings take center stage, with index futures up 0.2-0.3 percent.

Yields on safe-haven government bonds rose, the safe-haven yen fell and copper surged as some in markets suggested investors' worries over the coming weekend's French presidential election first round and still simmering tensions over North Korea appeared to ease somewhat.

The pan-European STOXX 600 index, which hit a three-week low on Tuesday, was up 0.3 percent, led by gains of 1.5 percent in banks.

Earlier, Asian equities outside Japan hit a one-month low, while Tokyo shares closed up 0.1 percent.

However, Britain's FTSE 100 index fell a further 0.3 percent following Tuesday's 2.5 percent slide, its biggest fall since June last year.

British stocks are vulnerable to a rising pound because more than two-thirds of FTSE 100 company earnings are derived from operations overseas. The FTSE has erased all its gains for the year.

Sterling was just off a six-month peak against the dollar above $1.28 having surged when British Prime Minister Theresa May called an early general election for June 8, seeking to strengthen her party's majority ahead of Brexit negotiations.

The dollar rose 0.2 percent against a basket of currencies but stayed close to Tuesday's three-week lows.

A run of disappointing U.S. economic data and doubts the Trump administration will progress with tax cuts have quelled expectations of faster inflation and boosted U.S. Treasuries.

The greenback rose half a percent against the safe-haven yen, having hit a five-month low on Monday on the mounting geopolitical tension over North Korea, Syria and the uncertain French election, and last traded just shy of 109 yen.

The euro dipped 0.1 percent to $1.0720 but held near a three-week high.

Just four days before the first round of voting in France, just a few points separate the top four candidates, including two who oppose the euro -- the far-right's Marine Le Pen and the far-left's Jean-Luc Melenchon.

"There were probably some nerves around the prospect of Melenchon making it into the final round, potentially even along with Le Pen, but that does seem to have faded," said Richard Benson, co-head of portfolio investment with currency fund Millennium Global in London.

Others took a different view, suggesting markets were approaching the vote with complacency.

"There is a real risk that we get a choice between the far-left and the far-right, neither of which would be market-friendly, and both of which could leave the EU in a very different position than it's in today," said Rabobank currency strategist Jane Foley, in London.

In commodity markets, profit-taking nudged gold down 0.6 percent to $1,282 an ounce and away from Monday's peak of $1,295.42.

Oil prices were little changed. Brent crude was last up four cents a barrel at $54.93.

Copper rebounded from a 14-week low as investors judged that the recent sell-off on the political uncertainties that have weighed on metals in recent weeks was overdone. It last traded at $5,630 a tonne, up 1.1 percent on the day.

(Reporting by Jamie McGeever; Editing by Andrew Heavens and Hugh Lawson)