GLOBAL MARKETS-Dollar shakes off Clinton FBI probe, stocks stay shaky

* European stocks fall 0.4 pct, worried by U.S. politics

* Dollar steadies, peso rebounds after fall on Friday

* Oil slips as non-OPEC producers fail to back supply limits

* European bond yields eye biggest monthly rise in years

By Marc Jones

LONDON, Oct (Shenzhen: 000069.SZ - news) 31 (Reuters) - The dollar steadied but stock markets remained wobbly on Monday after news the FBI was investigating more emails linked to Hillary Clinton's use of a private server while she was secretary of state.

The weakest German retail sales in two years, a dip in oil prices and one of the toughest month in years for bond markets all made for a shaky session in Europe, where the STOXX 600 index dropped 0.4 percent.

Wall Street looked set for a subdued restart too, having been hit by the news of the FBI moves on Friday, though a string of M&A deals including one involving the oil and gas arm of General Electric (Euronext: GNE.NX - news) provided some support.

MSCI (NYSE: MSCI - news) 's 47-country 'All World' index was also flat and heading for a 1.7 percent drop in October. That would be its first monthly fall since June and its worst month since a global shakedown in January.

The dollar saw a recovery however, rising against the yen, euro and sterling on the day and heading for its best month - up 3.2 percent - against the world's top currencies in just under a year.

The FBI announcement has thrown open the U.S. presidential race and given new hope to Clinton's Republican rival Donald Trump that he can beat her on Nov. 8.

"The Clinton story of course has had an impact," said Richard Benson, co-head of portfolio management at currency fund Millennium Global in London.

"The polls are now roughly 50-50, but the probabilities are still hugely in favour of Clinton, given how the votes are spread out (per state). The question is whether people decide to reduce risk ahead of the election."

U.S. Federal investigators have secured a warrant to examine newly discovered emails, a source told Reuters on Sunday.

Clinton had opened up a lead over Trump in national polls, but it had been narrowing even before the email controversy resurfaced. An ABC News/Washington Post poll released on Sunday showed Clinton with a statistically insignificant 1-point national lead.

The Mexican peso, which has become a market proxy for the Clinton/Trump race, also rebounded in European trading after being knocked on Friday.

South Africa's rand rallied too as fraud charges were dropped against the finance minister, though emerging market stocks struggled more broadly as the end of their four-month winning streak loomed.

YIELDS BOIL, OIL TOILS

The euro dropped to $1.0952 as data showed the euro zone economy growing at the same slow pace in the third quarter as it had in the second, and core inflation dipping, reinforcing expectations the European Central Bank will extend its asset-buying programme in December.

The jittery mood nudged investors back towards safe-haven government bonds, but it has been the opposite story for most of the month.

German government bond yields were on track to end October with their biggest monthly rise since 2013, with sentiment fragile ahead of central bank meetings this week and following the euro zone's economic and inflation data.

U.S. Treasury yields, which hit five-month highs last week, were poised for the biggest monthly rise since February 2015, while for Britain's gilts yields have risen almost 50 basis points, the biggest jump since January 2009.

"Recent sharp falls in sterling's value vis-à-vis the euro and the U.S. dollar could reduce confidence in sterling and eventually threaten its role as a global reserve currency," said Standard (Other OTC: SNDH - news) and Poor's, which reviewed the UK's credit rating on Friday.

"We could lower the rating if we conclude that sterling will lose its status as a reserve currency."

Oil prices extended their slide - driven by renewed oversupply concerns - and have surrendered most of the gains made in the first half of October. They are set to end the month with meagre gains.

The latest oil woes came after non-OPEC producers failed to make any specific commitment to join the Organization of Petroleum Exporting Countries in limiting output to support prices on Saturday.

U.S. crude slid 0.4 percent to $48.52 a barrel on Monday, but looked set to edge up 0.6 percent for the month, while global benchmark Brent also retreated 0.4 percent to $49.50, up 0.9 percent in October.

"There was a lot of talk and nobody managed to agree on anything. That has been pushing the market down," said Jeffrey Halley, senior market analyst at OANDA brokerage in Singapore.

Gold (Other OTC: GDCWF - news) eased back, having jumped Friday after the Clinton FBI jolt. Adding to the list of potential market-moving events this week is a raft of factory activity surveys on Tuesday for many economies.

There are also central bank policy meetings including Japan and Australia on Tuesday, the U.S. Federal Reserve on Wednesday and the Bank of England on Thursday, as well as U.S. October non-farm payrolls on Friday.

(Additional reporting by Jemima Kelly; Editing by Mark Trevelyan)