Oil prices rebound, sterling hit as May's lead shrinks

By Hilary Russ

NEW YORK (Reuters) - Oil prices recovered on Friday from some of the previous day's steep slide after investor disappointment that OPEC curbs did not go far enough, while Wall Street pulled back after six days of straight gains.

U.S. bond yields also stayed steady and gold saw big gains as a risk-off sentiment and concerns about political uncertainty took hold, with spot gold rising as far as $1,269.11, its highest levels since May 1.

"We have had the political noise coming from Trump and the U.S. administration and there is a certain element of uncertainty in the markets in general, which is supporting gold. Equities are also down," analyst Carsten Menke at Julius Baer in Zurich said.

Friday's partial rebound for oil prices followed a day of downward pressure. Some market participants had priced in more aggressive, extended output cuts from the Organization of the Petroleum Exporting Countries.

U.S. crude rose 1.74 percent to $49.75 per barrel and Brent was last at $52.14, up 1.32 percent on the day.

Sterling slid more than 1 percent following a poll showing the ruling Conservatives' lead shrinking two weeks before an election.

Britain's pound tumbled to a more than four-week low of $1.2772. It was last down 1.03 percent at $1.2806.

The dollar index rose 0.18 percent, with the euro down 0.3 percent to $1.1175.

Wall Street saw another strong day for consumer stocks, offset by weakness in healthcare and real estate shares. The flattening market threatened to break a winning streak, which included record high closes for the S&P 500 and the Nasdaq on Thursday.

The U.S. economy slowed less than initially thought in the first quarter as gross domestic product increased at a 1.2 percent annual rate.

The Dow Jones Industrial Average fell 2.1 points, or 0.01 percent, to 21,080.85, the S&P 500 gained 0.18 points, or 0.01 percent, to 2,415.25 and the Nasdaq Composite added 1.95 points, or 0.03 percent, to 6,207.20.

In Britain, the first opinion poll since a suicide bombing killed 22 people indicated the opposition Labour Party had cut the Conservative Party's lead to five points, with less than a fortnight to go to the parliamentary election.

Prime Minister Theresa May has said a big win would strengthen her hand in Brexit negotiations.

"With this kind of momentum and almost two weeks to go until the vote, not only is this not going to be the breeze that May anticipated when she called the snap election last month, it could yet turn into a humiliating defeat for the Conservative leader and her party," said Craig Erlam, senior market analyst at OANDA.

The sterling selloff was seen boding well for British exporters, however. British stock markets <.FTSE><.FTMC> bucked the downward trend and hit record highs.

The pan-European FTSEurofirst 300 index lost 0.22 percent and MSCI's gauge of stocks across the globe shed 0.10 percent.

Meanwhile, analysts said there was caution in the markets ahead of a meeting of leaders from the world's richest economies that was expected to expose deep divisions with U.S. President Donald Trump over trade and climate change.

The G7 summit comes after Trump criticized NATO allies' military spending and condemned German trade policies a day earlier.

For Reuters Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets

(Additional reporting by Dhara Ranasinghe and Eric Onstad in London, Tanya Agrawal in Bengaluru and Richard Leong and Julia Simon in New York; Editing by Nick Zieminski)