GLOBAL MARKETS-Europe cheers super-sized stimulus plan, U.S.-China tensions simmer

* EU stimulus drive shares up for fourth straight day
* Euro perched at 2-month high,
* Yuan, Hong Kong shares hit by rising U.S.-China tensions
* Oil markets slip after recent rebound

By Marc Jones
LONDON, May 28 (Reuters) - European shares rose for the
fourth straight session on Thursday and the euro perched at a
two-month high, as businesses returning to work and a 750
billion euro EU stimulus plan outweighed rising U.S.-China
tensions.
Asian markets had been subdued overnight after U.S.
Secretary of State Mike Pompeo had warned Hong Kong no longer
warranted special treatment under U.S. law but
there was no stopping Europe.
Traders diving back into the markets after Wednesday's EU
plan to prop up the bloc's coronavirus-hit economies pushed the
region-wide STOXX 600 index up 1% .STOXX to its highest since
early March. .Eu
The euro enjoyed the view at $1.1016 EUR=EBS , having risen
to a two-month high. It also held at the near three-month high
it had hit versus the neighbouring Swiss franc the previous day,
while the dollar =USD was largely quiet. /FRX
Euro zone bond yields were relatively stable too, with
Italian borrowing costs - a key European confidence indicator -
holding near eight-week lows and safe-haven German Bunds seeing
another small sell-off.
"With the release now of the European Commission's plan for
COVID recovery, we see there being room for further positivity
in Eurozone risk assets, even while the global sentiment is
buffeted by China-related tensions," Mizuho analysts told
clients.
"This feeds directly into our expectations for European risk
assets to outperform, which will be further helped by a likely
expansion of ECB QE next week."
Overnight, MSCI's broadest index of Asia-Pacific shares
outside Japan .MIAPJ0000PUS had ended flat, having been in
positive territory earlier in the day.
Shares in Hong Kong .HSI skidded as much 1.75% before
ending down a 0.7% as Chinese shares managed to close positive.
.SS . Japan's Nikkei had jumped 2.3% though U.S. stock futures
ESc1 lost momentum in Europe to trade only 0.1% higher.
.N .T
The biggest risk to equities now looks to be the Sino-U.S.
relationship, which is likely to worsen after Pompeo had said on
Wednesday that China's plan to impose new security laws in Hong
Kong were "only the latest in a series of actions that
fundamentally undermine" the city's autonomy. "All eyes remain on the U.S.-China relationship," said Chris
Weston, the head of research at Pepperstone, a currency broker.
"This is a risk for markets... One questions if the equity
markets are too complacent here."
A punitive U.S. response to China on the issue of Hong Kong
could result in a tit-for-tat reaction from Beijing, further
straining ties between the world's two biggest economies and
hobbling global growth.
President Donald Trump has said he will announce a response
to China's policies towards Hong Kong later this week.
Yields on 10-year U.S. Treasuries US10YT=RR rose slightly
to 0.6966%. Although they are up from an all-time low of 0.4980%
struck in March, they are still a whopping 120 basis points
below highs seen in January.
China's yuan CNH=D3 meanwhile was near a record low of
7.1966 per dollar in international markets due to uncertainty
over Hong Kong. In 'onshore' trade too, it was nearly at its
weakest since the height of the U.S.-China trade war last
September.
Commodity markets groaned. U.S. crude futures CLc1 fell
3.2% to $31.76 a barrel, while Brent crude LCOc1 fell 1.73% to
$34.14 per barrel as investors fretted about Trump's response to
China.