* Europe shares weakened by Prudential, HSBC
* Corporate news overshadows hopes of Greece debt deal
* Wall Street set for modest gains
By Jeremy Gaunt, European Investment Correspondent
LONDON, March 1 (Reuters) - Britain's pound took a battering on foreign exchange markets on Monday, falling more than 1 percent to 10-month lows against the dollar on worries about a coming election and its impact on the G7 nation's economy.
Wall Street looked set for gains, but equities in Europe were depressed as investors digested Prudential's purchase of AIG's Asian assets and on dipping profits at HSBC.
The corporate news overwhelmed a flurry of speculation that an EU deal over Greek debt was pending and a rise in mining stocks, pushed up as copper prices gained following a massive earthquake in top producer Chile.
Uncertainty over Britain's political direction sent sterling on its biggest one-day drop in more than a year.
An opinion poll published on Sunday suggested Britain's ruling Labour Party could remain the biggest party after this year's general election but without a majority in parliament.
The prospect of such a result -- known as a hung parliament -- has rattled investors who fear that decision-making would become stymied, undermining a fragile UK recovery.
"Sterling remains under major pressure on its political/fiscal woes, with latest opinion polls suggesting a very tight election in early May," ING analysts said in a note.
The pound was at $1.4902, down 2.3 percent after earlier hitting a low of $1.4781.
The euro gained support as the market speculated that a visit by EU Economic Affairs Commissioner Olli Rehn and European Central Bank Executive Board member Juergen Stark to Athens could herald an end to Greece's current debt crisis.
"The markets are still focused on risk right now so it will be critical to see a resolution of some of the fiscal concerns in Europe," said Macquarie Securities strategist Michael Kurtz.
WEAKER EUROPE
World stocks as measured by MSCI were flat to lower, though emerging markets gained 0.8 percent. The pan-European FTSEurofirst 300 was also flat.
Shares were supported by mining stocks as copper gained 2 percent on likely supply disruptions in Chile.
Euro zone government bond prices were generally weaker but the spread between German and Greek debt narrowed on speculation about a deal.
(To read Reuters Global Investing Blog click on http://blogs.reuters.com/globalinvesting; for the MacroScope Blog click on http://blogs.reuters.com/macroscope; for Hedge Hub click on http://blogs.reuters.com/hedgehub)
(editing by John Stonestreet)