* Italian stocks slump 1.6% on snap election worries
* U.S. may delay permitting companies to trade with Huawei
* Yuan stabilizes, Chinese stocks fall after soft data
* Gold at six-year high, best week for three years
* Japanese yen at eight-month high
By Marc Jones
LONDON, Aug 9 (Reuters) - Trade war worries and the prospect of early elections in Italy and Britain hit European markets on Friday, while the week's search for safety left gold on course for its best week in three years, Japan's yen at an eight-month high and bonds surging.
A turbulent week dominated by a drop in China's currency was not finished yet. A report that Washington was delaying a decision about allowing some trade between U.S. companies and Huawei again spooked Asia was then led lower by a 1.6% slump in Italian stocks after Matteo Salvini, the leader of one of the country's ruling parties, the League, pulled his support for the governing coalition on Thursday. .EU
Snap elections have been likely for months, but markets were when Salvini – who's publicly insisted the government would last its full five years – pushed for a new poll.
Investors dumped Italian government debt, pushing yields -- which move inversely to prices -- on Rome's 10-year bonds up 21 basis points to 1.749%, the biggest daily increase in almost a year IT10YT=RR .
London's FTSE and the pound were under strain, too, after reports the new UK Prime Minister, Boris Johnson, was planning for an election after an Oct. 31 Brexit Sterling fell to two-year lows against the euro.
"It has been a very volatile week," said Elwin de Groot, Rabobank's head of macro strategy. "Until recently, the markets' view was that this trade war will be resolved, but clearly now the thinking is that maybe this is not the case and could be accelerating from here."
U.S. stock futures ESc1 didn't look much brighter. They were down as much as 0.5% in Europe, although the S&P 500 had had its best session in two months on Thursday. .N
MSCI's broadest index of world shares, which tracks 47 countries, was drifting back into the red and heading for its second straight week of declines, after one of its worst days in years on Monday.
Asia ex-Japan .MIAPJ0000PUS ended down 2.3% for the week after data showed China's first decline in producer prices in three years, compounding the Huawei disappointment offshore yuan managed to hold steady, even after China's central bank set its daily midpoint fixing CNY=PBOC at 7.0136 per dollar, the weakest since April 2, 2008.
The yen meanwhile rose as much as 0.4% against the dollar to 105.70 yen, an eight-month high.
"The news about Huawei triggered the rise in the yen," said Junichi Ishikawa, senior foreign exchange strategist at IG Securities. "This is a reminder that the U.S.-China trade dispute remains a risk, and this risk is not receding."
Other safe havens also gained. Gold XAU= rose above $1,500 on Friday, its highest in more than six years, en route to its best week since April 2016.
Oil prices held most of the previous day's gains as well, on expectations of more production cuts by OPEC. O/R
Brent crude LCOc1 hovered at $57.32 per barrel. U.S. West Texas Intermediate (WTI) CLc1 crude fell 0.1% to $52.50.