* Europe stocks dip on security worries, Wall St seen
* Sterling rises vs dollar, UK stocks fall as May calls vote
* France/Germany bond yield gap tightens before French vote
* Oil falls on rising U.S. shale output
* Graphic: World FX rates in 2017 tmsnrt.rs/2egbfVh
By Nigel Stephenson
LONDON, April 18 Shares and the dollar fell on
Tuesday as a snap general election call in Britain added to a
lengthening list of uncertainties for investors already on edge
over tensions simmering from North Korea to France.
Wall Street also looked likely to open marginally lower,
index futures showed, after stocks weakened in
Europe and Asia.
Sterling rose nearly 1 percent against the dollar and UK
shares hit 2 1/2-month lows after British Prime Minister Theresa
May called an early parliamentary election for June 8.
Speaking outside her Downing Street office, May said she had
decided "with reluctance" that an election was needed to secure
political unity and stability as Britain negotiates its way out
of the European Union.
The pound rose as high as $1.2678, reflecting
relief that rumours she might resign proved unfounded. It last
traded at $1.2673, up 0.8 percent on the day.
The FTSE 100 stocks index, already falling on its
first trading day since the Easter break, fell further and was
last down 1.8 percent, at its lowest since late February.
"I guess people see that this may give Theresa May a better
majority. It is a politically astute move and it should provide
more stability going over the immediate aftermath of the exit
from the EU," said Simon Derrick, head of global market research
at Bank of New York Mellon in London.
With market activity reduced in the past week due to Easter
holidays, investors have focused on political factors that also
include Syria and U.S. relations with Russia and China.
European shares fell on Tuesday. The pan-European STOXX 600
index, which hit 16-month highs last week, was down 0.9
percent, led lower by a 3 percent fall in the basic resources
sector as commodity prices dropped.
MSCI's broadest index of Asia-Pacific shares outside Japan
slipped by 0.7 percent, while Tokyo's Nikkei
closed up 0.4 percent on earlier yen weakness.
The dollar declined 0.3 percent against a basket of major
currencies. It earlier lifted off five-month lows versus
the yen after U.S. Treasury Secretary Steven Mnuchin told the
Financial Times that a strong dollar was a positive in the long
term, while agreeing with U.S. President Donald Trump that it
hurt exports in the short term.
The greenback traded at 108.76 yen, down 0.1 percent
on the day, while the euro was up 0.4 percent at $1.0681.
Investor nervousness ahead of Sunday's French election made
itself felt in currency and debt markets. French 10-year
government bond yields initially rose while
ultra-safe German equivalents dipped, taking the
gap between the two close to six-week highs.
But French yields later fell while German yields edged up
and the spread with Germany narrowed to its tightest in a week
after an opinion poll put centrist Emmanuel Macron first in the
first round of voting, just ahead of far-right, anti-euro
candidate Marine Le Pen, with a bigger gap to far-left
representative Jean-Luc Melenchon.
The cost of hedging against big moves in the euro against
both the dollar and the yen over the next month jumped on Monday
to their highest levels since Britain's vote in June 2016 to
leave the European Union .
"Every poll that is coming out now is being scrutinised
closely," said DZ Bank strategist Christian Lenk. "Nevertheless,
markets remain very nervous ahead of Sunday."
Implied volatility in the STOXX 600 index hit its highest
since early November 2016.
Turkey's lira rose against the dollar after Turkish
President Tayyip Erdogan rejected Western criticism of a
referendum in which he won sweeping new powers.
"The markets are taking this initial result as positive
insofar the buck now stops with one person and in theory
political noise should come down," Greg Saichin, CIO emerging
markets fixed income at Allianz Global Investors said. He added
that the next battleground would be Turkey's 2019 election.
Oil prices fell after a U.S. government report indicated
U.S. shale production was rising. Brent, the international
benchmark crude, fell 41 cents a barrel to $54.95.
Copper was down 0.8 percent at $$5,650 a tonne
Gold was marginally higher on the day at $1,285 an
ounce, having touched a five-month high of $1,295 on Monday, the
day after a failed North Korean ballistic missile launch.
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 Nichola Saminather in Singapore, Dhara
Ranasinghe, Ritvik Cravalho and Claire Milhench in London;
editing by Mark Heinrich)