WRAPUP 7-Oil, shares fall on potential limit on China investments

(Adds close of U.S. markets)
* MSCI's world equity index closes down
* Shares on Wall Street post biggest weekly loss since
August
* Trump impeachment talk adds to geopolitical risk
* U.S.-China trade optimism boosts shares in Europe
* But investors see major deal in October unlikely

By Herbert Lash
NEW YORK, Sept 27 (Reuters) - Oil prices and a gauge of
global equity markets fell on Friday on media reports that the
administration of President Donald Trump may limit U.S.
portfolio investments into China, a move that would mark an
escalation of U.S.-Sino trade tensions.
The delisting of Chinese companies from U.S. stock exchanges
was part of a broad effort to limit U.S. investment in Chinese
companies, two sources briefed on the matter told Reuters.
Shares on Wall Street pared gains to close down. The
benchmark S&P 500 posted its biggest weekly loss since Aug. 23,
and the Nasdaq posted its the biggest weekly loss since Aug. 2.
Chinese shares listed on U.S. exchanges tumbled, with
Alibaba Group Holding BABA.N falling 5.15% and JD.com JD.O
5.95%. Baidu BIDU.O slipped 3.67%.
Renewed high-level trade talks between Washington and
Beijing are scheduled for next month.
"If our policies spark a major sell-off in Shanghai where
that creates problems for China, that could negatively impact
the trade negotiations," said Michael O'Rourke, chief market
strategist at JonesTrading in Greenwich, Connecticut.
Gold pared some losses, after falling more than 1%, as
investors opted for the safety of bullion following the
delisting reports.
MSCI's world equity index .MIWD00000PUS , which tracks
shares in 47 countries, had rebounded earlier in the session on
optimism the U.S.-China trade row might be easing. Markets
largely brushed off concerns about impeachment moves against
Trump.
The world index closed down 0.41%, while on Wall Street the
Dow Jones Industrial Average .DJI fell 73.28 points, or 0.27%,
to 26,817.84. The S&P 500 .SPX lost 17.2 points, or 0.58%, to
2,960.42 and the Nasdaq Composite .IXIC dropped 90.06 points,
or 1.12%, to 7,940.60.
Major equity indexes in Europe earlier closed higher, even
as data showed slowing growth around the world. U.S. data showed consumer spending barely rose in August and
business investment remained weak, suggesting the American
economy was losing momentum as trade tensions linger.
Still, the Commerce Department reports likely do not signal
a recession is looming as consumer spending remains supported by
solid income growth thanks to the lowest unemployment rate in
nearly 50 years and massive savings.
A strong rally in mining shares propped up European shares,
but they ended the week lower for the first time in five weeks
as concerns about economic growth and trade, as well as
political worries, kept a lid on gains. The pan-European STOXX 600 index .STOXX closed up 0.47%
and the FTSEurofirst 300 index .FTEU3 of leading regional
shares gained 0.41%.
Earlier in the day, Asia-Pacific shares outside Japan
.MIAPJ0000PUS were buffeted by the political worries in the
United States and shed 0.3%.
Oil prices fell and posted a weekly loss on
faster-than-expected recovery in Saudi output, while investors
also worried about global crude demand amid slowing Chinese
economic growth.
During a volatile session, Brent crude LCOc1 futures fell
83 cents to settle at $61.91 a barrel.
U.S. West Texas Intermediate (WTI) crude CLc1 futures fell
50 cents to settle at $55.91 a barrel.
In China, the world's second-largest economy and biggest
importer of crude oil, industrial companies reported a
contraction in profits in August.
"If the global economy weakens, for which there are already
some signs, we may lower oil demand expectations," IEA Executive
Director Fatih Birol told Reuters.
Bond yields in France and Spain posted their biggest weekly
decline in six weeks, while a key market gauge of the euro
zone's inflation expectations fell to its lowest level since
early July at 1.188% EUIL5YF5Y=R , heading back toward record
lows hit in June.
French and Spanish 10-year bond yields were down 6-9 basis
points this week, their biggest weekly decline in six weeks
ES10YT=RR FR10YT=RR .
U.S. Treasury prices traded little changed after U.S. data
was weaker than expected and as month- and quarter-end
rebalancing increased demand for safe-haven U.S. debt.
Benchmark 10-year notes US10YT=RR traded at break-even to
yield 1.6853%.
The dollar index .DXY fell 0.05%, with the euro EUR= up
0.2% to $1.0943. The Japanese yen JPY= weakened 0.06% versus
the greenback at 107.92 per dollar.
U.S. gold futures GCcv1 settled down 0.6% to $1,506.40 an
ounce.