#Global markets* European shares head for first weekly drop since April

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LONDON (June 27): Concerns about Iraq and Ukraine and subdued economic data left European shares facing their first week of losses since early April on Friday and nudged gold towards a two-month high. Other safe-haven assets including the yen, Swiss franc and German government bonds were also in demand as investors took a step back from riskier bets. Gold climbed back towards $1,325 an ounce and looked set for its fourth straight weekly gain, as the fallout from Thursday's weak U.S. consumer spending figures also hurt the dollar. The situation in Iraq was tense overnight after at least one armed forces helicopter crashed under fire from insurgents, while Russia warned of "grave consequences" after Ukraine signed a trade and political agreement with the European Union. But while the geopolitical tensions weighed, there was the comfort that the disappointing U.S. data could keep interest rates at record lows for a longer period of time - meaning markets struggled for clarity. Stock markets in London, Frankfurt and Paris rose slightly in early trading though the recent selloff was set to bring a ten-week run of unbroken gains to an end. "The advance (in stock markets) has stopped for a while but there has been no five or ten percent correction," said Alvin Tan, a strategist at Societe Generale. "And that is a result of the environment of very low volatility we have at the moment." Investors were also digesting a tick down in euro zone business and consumer confidence data and awaiting German inflation numbers, both important for the  European Central Bank's future policy. Oil, usually the most sensitive to Middle East unrest, was on course for its biggest weekly drop since January due to the fact the fighting in Iraq had not yet spread to the south where most oil is produced. At $113 a barrel, prices have dropped nearly $3 from a nine-month high of $115.71 hit on June 19. "The exaggerated fear premium is being priced out," said Carsten Fritsch, a senior oil and commodities analyst at Commerzbank in Frankfurt. U.S. doubts Asian shares had followed Wall Street lower overnight. Japan's benchmark Nikkei fell 1.5 percent and regional markets, with the exception of Wellington and Mumbai, all posted losses. A smaller-than-expected increase in May's U.S. consumer spending, in data released on Thursday, had added to concerns about the U.S. economy following surprisingly weak first quarter GDP data.    The 10-year U.S. Treasuries yield fell to a four-week low of 2.511 percent in early European trading. The U.S. dollar index held close to one-month lows hit on Wednesday. It stood at 80.150, a whisker above the low of 80.091 and at a five-week low of 101.315 yen. "People are assessing where they think their second- and third-quarter, fourth-quarter GDP estimates are going to be," said Wilmer Stith, co-manager of the Wilmington Broad Market Bond Fund. The euro was little changed at $1.3618 after the euro zone data. Standout performers were the New Zealand dollar, which hovered at its highest in nearly three years, and the Canadian dollar, which rose to a six-month high as investors sought out higher-yielding currencies.