* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr LONDON, May 17 (Reuters) - Euro zone bond yields fell on Monday, pulling back from multi-month highs as markets took time out from a recent sharp selloff. A recovering economy that could encourage the European Central Bank to slow the pace of its emergency bond purchases, a pick up in the COVID-19 vaccine rollout that boosts the growth outlook and rising U.S. inflation have renewed upward pressure on sovereign bond yields. German 10-year Bund yields last week rose almost 10 basis points, the biggest one-week rise since February. Italian yields climbed almost 16 bps in their biggest weekly jump in over a year. But stability appeared to return to bond markets early on Monday with most 10-year bond yields down 1-2 bps across the currency bloc. German 10-year bond yields were down 1 bps at -0.14% , having risen as high as -0.096% last week -- their highest level in almost two years. “Bunds stabilise around key levels as the market is taking a breather from the recent yield chase and the focus shifts from inflation towards subdued activity data,” analysts at Commerzbank said in a note. Data on Monday showed China’s factories slowed their output growth in April and retail sales significantly missed expectations. This alongside concern about the renewed spread of coronavirus in Taiwan and Singapore weighed on sentiment in world stocks, supporting safe-haven bond markets. U.S. Treasuries also appeared to be on stronger ground in early London trade, with 10-year yields down around 2.5 bps at 1.61%. Elsewhere, there was some focus on opinion polls showing Germany’s Greens and Chancellor Angela Merkel’s conservatives now neck and neck in the opinion polls. The Greens have enjoyed a lead in recent weeks, a development analysts say may have contributed to the rise in German bond yields given implications for more environment-focused spending and greater euro zone cohesion should the party become a key member of the next government. Germany’s election takes place in September. “The recent shift in polls suits our view that the election result will be much closer to the polls taken before the decisions for Baerbock and Laschet made waves four weeks ago than to the polls taken right thereafter,” said Berenberg chief economist Holger Schmieding, referring to Annalena Baerbock, the Greens’ chancellor candidate, and Armin Laschet -- the candidate for the conservative CDU/CSU. (Reporting by Dhara Ranasinghe; Editing by Kirsten Donovan) Our Standards: The Thomson Reuters Trust Principles.