GLOBAL MARKETS-Global stocks skid as Hong Kong returns as Sino-U.S. flashpoint

* Hang Seng falls over 5% as Beijing plans new security law
* Hong Kong latest front in deteriorating U.S.-China ties
* China pledges more stimulus, does not set 2020 growth
target
* European shares seen falling 1%, oil sinks 7%

By Hideyuki Sano
TOKYO, May 22 (Reuters) - Global shares tumbled on Friday as
Hong Kong's political unrest returned as a flashpoint in
fast-deteriorating U.S.-China relations, following Beijing's
moves to impose a new security law on the city.
The Asian financial hub's benchmark Hang Seng index .HSI
sank 5% to a seven-week low, pulling MSCI's broadest index of
Asia-Pacific shares outside Japan .MIAPJ0000PUS down 2.5%.
The CSI300 index of mainland Chinese shares .CSI300
dropped 1.9% while Japan's Nikkei .N225 lost 1%. Pan-European
Euro Stoxx 50 futures STXEc1 were down 0.97% while e-mini
futures for U.S. S&P500 EScv1 lost 0.8%.
China is set to impose new national security legislation on
Hong Kong to tighten its grip on the semi-autonomous city.
The decision drew a warning from President Donald Trump that
Washington would react "very strongly" against the attempt to
gain more control over the former British colony.
"It is starting to look like a U.S.-China summer of
discontent in the making," said Stephen Innes, chief global
market strategist at AxiCorp.
"So far, China's response has been relatively tame despite
Trump's daily goading. That might be due so that policymakers
can focus on the NPC, but there is always the possibility of a
firmer response."
Hong Kong activists called on Friday for people to rise up
against Beijing's plans although a proposed midday march in the
central financial district did not materialise. The new Sino-U.S. rift comes amid already tense relations
between the two superpowers after Washington stepped up its
rhetoric against China over the coronavirus and other points of
difference.
Earlier this month, the U.S. State Department delayed a
report to Congress assessing whether Hong Kong enjoys sufficient
autonomy from China to continue receiving special treatment from
the United States. Washington has ramped up criticism of China over the origins
of the pandemic. Last week, it moved to block global chip
supplies to blacklisted telecoms equipment giant Huawei
Technologies HWT.UL , while the U.S. Senate passed legislation
that could prevent some Chinese companies from listing their
shares on U.S. exchanges. Rising tensions are casting a pall over recent optimism that
the worst of the pandemic's economic impact was already over in
most developed countries.
The pace of recovery remains highly uncertain -- a point
highlighted by China's decision not to set an economic growth
target this year for the first time in decades. While Beijing pledged more government support for the
virus-hit economy, it set a target to create over 9 million
urban jobs this year, down from a goal of at least 11 million in
2019 and the lowest since 2013.
"The absence of a GDP growth target for this year confirms
that, as we expected, policymakers accept that, after the plunge
in Q1, economic growth will be low for 2020 as a whole even with
a significant sequential recovery in Q2-Q4," Oxford Economics
said in a note to clients.
"The sizeable overall fiscal deficit target indicates
significant policy support for the domestic recovery that we
expect to continue despite the challenging external background.
We expect year-on-year GDP growth to average 4% in H2."
The worsening mood pushed riskier currencies lower, with the
Australian dollar dropping 0.5% to $0.6531 AUD=D4 and the euro
easing 0.25% to $1.0922 EUR= .
The safe-haven yen gained 0.15% to 107.45 per dollar JPY= .
The yen brushed off the Bank of Japan's new lending scheme
to channel more money to small businesses, which mimics the U.S.
Federal Reserve's "Main Street" programme. The decision had been widely anticipated after the BOJ
flagged the creation of the scheme last month.
Oil prices also tumbled from a two-month peak with U.S.
crude futures CLc1 losing 7.3% to $31.44 per barrel.

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(Editing by Kim Coghill and Sam Holmes)