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UPDATE 1-German bond yields set for biggest weekly drop since April

* U.S.-Russia probe sends yields to one-month low

* Raises investor concerns about Trump's spending pledges

* Strong euro could hurt recovery, say analysts

* Euro zone periphery govt bond yields http://tmsnrt.rs/2ii2Bqr (Recasts and writes through)

LONDON, Aug 4 (Reuters) - Europe's benchmark government bond yield was set for its biggest weekly fall since April on Friday as an investigation into suspected Russian meddling in the 2016 U.S. election fed into broader concerns about the health of the global economy.

Reuters reported on Thursday that a grand jury has issued subpoenas in connection with a meeting before the election that included President Donald Trump's son, his son-in-law and a Russian lawyer.

For investors, the development serves as yet another sign that Trump may be distracted from seeing through ambitious spending plans that could support the world's biggest economy.

It also led to a weakening in the dollar, bolstering the euro's recent strength which analysts said could hinder the single currency bloc's recovery and force policymakers to keep monetary conditions very easy.

"It has reduced growth prospects globally," said Christoph Rieger an analyst at Commerzbank in Frankfurt.

"The dollar's weakness has only added to the euro's strength, reduced earnings forecasts and supported demand for Bunds."

In the U.S., a run of lackluster economic data has raised questions over how quickly U.S. central bankers can tighten monetary policy. Jobs and unemployment data later on Friday are key events on this front.

Economists polled by Reuters expect the U.S. economy to have added 183,000 jobs in July, down from 222,000 the previous month, with the unemployment rate to have edged down to 4.3 percent from 4.4 percent previously.

"The mounting U.S. economic gloom mean that expectations for today's employment report are likely lower than the consensus," Mizuho's head of euro rates strategy Peter Chatwell said.

An announcement expected on Friday of a U.S. inquiry into China's trade practices -- a move which could cause friction between the two superpowers -- has been postponed.

U.S. 10-year bond yields slid to their lowest levels in over a month at 2.22 percent on Thursday after Reuters reported on the subpoenas and held near that level on Friday.

German equivalents followed suit on Friday, hitting a new one-month low of 0.45 percent, while lower-rated bond yields in Italy and Spain rose.

German yields have fallen 9 basis points this week, their biggest drop since April.

The euro edged up on Friday against a broadly weaker dollar, trading just below a 2-1/2-year high.

The single currency gained nearly 4 percent in July, its biggest rise in 16 months, and is the best performing G10 currency this year, up 13 percent.

For Reuters Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.bi z / c m s / ? p a g e I d = l i v e m a r k e t s

(Editing by Catherine Evans and Toby Davis)