* Oil prices slip on doubts on production cut deal this week
* U.S. bond yields, dollar fall from highs
* Battered emerging markets win reprieve
* Italian banking shares drop 3 pct on political worries
* Graphic: World FX rates in 2016 tmsnrt.rs/2egbfVh
By Marc Jones
LONDON, Nov 28 The dollar saw its biggest drop
in almost a month on Monday as a bashing for oil prices on
doubts about an OPEC output cut this week left investors
reversing "Trumpflation" trades that have gripped markets since
the U.S. election.
Crude prices and Europe's main stock markets
were down over 1 percent in early European trading
as Italian shares also took a fresh tumble ahead of its
referendum on constitutional change this Sunday.
Oil's fall added to a 3.5 percent plunge on Friday when it
emerged that Saudi Arabia would not join talks with non-OPEC
producers on potential supply cuts.
With oil so vital for global costs it was rapidly cooling
bets on a near-term inflation jump and tempering expectations
for rises in U.S. interest rates that have been running up fast
in recent weeks.
The dollar sank as much as 1.6 percent against the yen,
going as low as 111.355 yen before recovering slightly to
That was still its biggest fall against its Japanese rival
since October 7 and against a basket of top world currencies
it was the greenback's worst day since November.
"It's a bit of a pull back in the dollar," said Societe
Generale strategist Alvin Tan. "The fall in oil is pushing back
U.S. bond yields and that is leading the consolidation in the
dollar.. there is more scepticism about an (OPEC) output cut
The moves hoisted the euro to an 11-day high $1.0686
as it got a lift too from the election of Francois Fillon as the
centre-right candidate in next year's French presidential
The reformist former prime minister is now favourite to
become president, with a flash opinion poll showing he would
easily beat National Front leader Marine Le Pen in a run-off
second round. Markets worry the far-right Le Pen, who has
promised a referendum on membership of the European Union if she
wins, would threaten the future of the currency bloc.
Italy, which has been plagued by political concerns ahead of
its referendum on constitutional reform, remained a more obvious
Having lost more than half their value over the last year,
Italian banking stocks fell 3 percent to their
lowest in almost two months as Italian government bonds
also underperformed the wider rally in fixed income.
Opinion polls now predict defeat for the government in what
would be the third big anti-establishment revolt by voters this
year in a major Western country, following Britain's unexpected
vote to leave the European Union and the U.S. election of Donald
"Fears are that an Italian dissent and resulting market
turmoil would dissuade already gutsy investors from daring to
participate in desperately needed recapitalisations within a
very troubled 4 trillion euro banking system," said Mike van
Dulken, Head of Research at Accendo Markets.
As the dollar wilted in the currency markets, gold
bounced back to $1,192.0 per ounce from Friday's low $1,171.5,
which was its lowest level since early February.
Industrial metals also remained red hot on hopes of strong
demand for property and infrastructure investment in China and
the United States.
Chinese steel futures jumped over 6 percent, while
iron ore futures also gained about six percent and
zinc, used to galvanise steel, powered to a nine-year
high on the London Metal Exchange.
Asian shares rose 0.4 percent overnight, led
by gains in Hong Kong and Taiwan though Japan's
Nikkei, which has been performing even better than a
record high Wall Street in recent weeks thanks to the yen's
fall, ended down 0.1 percent.
"It will be scary to think markets may fully reverse their
moves since the elections, changing their mind that Trump's
policy may not be so good after all," said Bart Wakabayashi,
head of Hong Kong FX sales at State Street Global Markets.
In the bond markets, the yield on 10-year U.S. Treasuries
dropped almost 5 basis points to 2.323 percent, off
its 16-month high of 2.417 percent touched last week. Europe's
benchmark, German Bunds, saw their equivalent yield drop 3 basis
U.S. stock futures slipped 0.2 percent ahead of U.S.
trading. Wall Street's four main indexes
all hit record highs last week, a feat last achieved in
(Editing by Janet Lawrence)