* Oil hits three-week high on OPEC prospects, weaker dollar
* Copper up on expectations of more China demand
* Dollar slips but stays close to highest since 2003
* French primary surprise triggers bond market volatility
* Europe stocks edge up, Wall St seen opening modestly
By Nigel Stephenson
LONDON, Nov 21 Oil prices rose to three-week
highs on Monday, supported by a weak dollar and helping to nudge
a gauge of inflation expectations in the euro zone to its
highest since January.
Oil and gas and other commodity-related shares rose, lifting
European stock markets after slight falls in Asia. Wall Street
looked set to open higher, according to index futures
Brent crude oil, the international benchmark, rose as high
as $47.94 a barrel, its highest since Nov. 1 and up some
2 percent on the day, on signs that OPEC was moving closer to a
deal to cut output when it meets next week.
"While loose terms may be agreed, I remain sceptical that a
full detailed agreement can be both achieved and carried out by
OPEC, given the clear differences that are so evident between
certain key members," OANDA markets strategist Craig Erlam said.
Oil's rise comes as markets have been bracing for higher
inflation if U.S. President-elect Donald Trump implements some
of the tax cuts and infrastructure spending plans he outlined in
A year ago, Brent traded at just under $45 a barrel. It then
slid rapidly to just under $27 a barrel in January, meaning that
a price-boosting deal by the Organization of the
Petroleum-Exporting Countries when it meets next week could lead
to rapidly accelerating year-on-year inflation early in 2017.
In the euro zone, the five-year, five-year breakeven forward
rate - the European Central Bank's favoured gauge
of market long-term inflation expectations - topped 1.60 percent
on Monday, below the ECB's inflation target of close to but less
than 2 percent but its highest since January.
The prospect of higher inflation, and growth, has helped
drive global bond yields and the dollar higher since Trump's
election victory earlier this month.
German benchmark 10-year government bond yields
edged higher on Monday, though U.S. Treasury
equivalents, and the dollar weakened.
The dollar fell 0.3 percent against a basket of six peers
but still held close to its highest levels since early
2003. The Japanese yen rose 0.3 percent to as high as 110.43 per
dollar, having earlier fallen to 111.19 yen, its weakest
since early June.
The euro rose 0.5 percent to $1.0649, with analysts
saying the move reflected the abundant political risks facing
Europe over the coming year.
A surprisingly strong showing by conservative former premier
Francois Fillon in French presidential primary at the weekend
was expected to heighten uncertainty. Some suggested that his
unpopularity among left-wing voters could increase far-right,
anti-euro leader Marine Le Pen's chance of victory in an
election to be held in April and May.
However, German Chancellor Angela Merkel's announcement on
Sunday that she would seek a fourth term in next September's
election removed another source of political uncertainty, which
has intensified since Britain's vote in June to leave the
European Union and Trump's election on Nov. 8.
In Italy, which faces a referendum on which Prime Minister
Matteo Renzi has staked his job, 10-year government bond yields
rose fell 1.5 basis points to 2.01 percent, having
earlier risen to above 2.05 percent.
"Indirectly, the French primary vote could reinforce concern
about an anti-establishment backlash in Europe," said Martin Van
Vliet, senior rates strategist at ING. "Even if the sell-off in
core bonds is fading, we still see pressure on the periphery."
The pan-European STOXX 600 share index rose 0.1
percent, reversing earlier falls, with the oil and gas sub-index
up 1.6 percent and basic resources, which includes
miners, adding 2 percent.
For Reuters new 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
MSCI's main Asia-Pacific, excluding Japan, stock index
fell 0.1 percent and Australia's S&P/ASX200
index retreated 0.2 percent.
Japanese shares closed up 0.8 percent, lifted by yen
weakness against the dollar before the currency turned.
Copper prices, which have risen on Trump's promise to spend
heavily on infrastructure, were up 2.5 percent at $5,560
a tonne on the prospect of better demand in top consumer China
and a smaller growth in supply.
"All in all, the outlook for copper demand has improved, and
that is justifying that prices are also coming up," said
Quantitative Commodity Research consultant Peter Fertig.
(Additional reporting by Hideyuki Sano in Tokyo, Amanda Cooper,
Dhara Ranasinghe, Abhinav Ramnarayan and Zandi Shabalala in
London; editing by Larry King)