* Oil prices recover on technical support
* Gold, German bunds at recent highs as safe assets thrive
* European shares hit, U.S. stocks down partly on retail
* Sterling slightly lower before UK election (Adds oil recovery and settled price; updates throughout)
By Hilary Russ
NEW YORK, June 6 (Reuters) - U.S. Treasury yields and the dollar dropped to seven-month lows on Tuesday and world stocks slid as political uncertainty from the United States to Britain and the Middle East pushed investors away from risky assets.
The yen and gold also gained amid prevailing caution as an Arab rift opened up around Qatar, and ahead of testimony from the former head of the FBI, a British election and the European Central Bank’s next move, which all happen on Thursday.
“We have risk events piling up,” said Blake Gwinn, U.S. rates strategist at NatWest Markets in Stamford, Connecticut. “We’ll be very focused on what happens on Thursday, but it might end up being a dud.”
Wall Street was lower for a second day after both European and Asian stocks dropped during their sessions.
Retail stocks also pulled shares lower, with Macy’s Inc losing ground after a warning on profit margins, and Wal-Mart Stores Inc down after rival Amazon.com Inc said it would offer a discount on its popular Prime subscription service to shoppers who receive U.S. government aid.
The Dow Jones Industrial Average fell 8.22 points, or 0.04 percent, to 21,175.82, the S&P 500 lost 0.61 points, or 0.03 percent, to 2,435.49 and the Nasdaq Composite added 6.28 points, or 0.1 percent, to 6,301.96.
On what BayernLB analysts called “Super Thursday”, British voters will also go to polls in an increasingly unpredictable general election, the European Central Bank is due to meet and former FBI director James Comey will testify before Congress.
“Once these events pass, we may have a little more clarity and therefore see a little less caution in the markets,” said Craig Erlam, a market analyst for OANDA securities.
The diplomatic spat in the Middle East initially dented oil prices, which slid below $47 a barrel on Tuesday before recovering on technical support.
U.S. crude oil futures settled up 79 cents, or 1.67 percent, at $48.19 per barrel. Brent was last up 1.17 percent on the day, or 58 cents, at $50.05.
The pan-European FTSEurofirst 300 index lost 0.62 percent and MSCI’s gauge of stocks across the globe shed 0.14 percent.
Investors piled into gold, U.S. Treasuries and German government bonds - some of the safest assets in the world - thrusting German 10-year borrowing costs to six-week lows.
U.S. Treasury yields dropped to a seven-month low of 2.129 percent at one stage and gold briefly touched a high of $1,295.97, prices not seen since November.
Lower bond yields come despite the Federal Reserve widely expected to raise U.S. interest rates a quarter point next week, but also follows a run of weaker-than-expected U.S. data.
Sterling was 0.12 percent lower ahead of Thursday’s general election. British Prime Minister Theresa May looks on course to increase her parliamentary majority, an opinion poll showed on Tuesday, shortly after another survey suggested the race with the opposition Labour Party was neck and neck.
The dollar, meanwhile, was fell to a more than six-week low against the yen and was at its weakest since the November U.S. election against a basket of other world currencies.
The dip came ahead of Comey’s expected testimony on Thursday.
Reports suggest the former FBI chief plans to talk about conversations in which U.S. President Trump allegedly pressured him to drop his investigation into former national security adviser Mike Flynn, who was fired for failing to disclose conversations with Russian officials.
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 Abhinav Ramnarayan in London, Richa Naidu in Chicago, Anya George Tharakan in Bengaluru and Richard Leong, Saqib Iqbal Ahmed and Jessica Resnick-Ault in New York