GLOBAL MARKETS-Hong Kong unrest worries curb global shares rally

* European shares advance to 11-week highs
* Hong Kong, China shares hit by new protests
* Yuan falls to lowest since September
* Brent crude futures fall 1.5%
* World FX rates in 2019: http://tmsnrt.rs/2egbfVh

By Tom Arnold and Hideyuki Sano
LONDON/TOKYO, May 27 (Reuters) - Unrest in Hong Kong over
Beijing's proposed national security laws weighed on global
shares and oil prices on Wednesday, offsetting optimism about
the re-opening of the world economy.
Riot police fired pepper pellets on protesters in Hong
Kong's main business district, rekindling concern about the
protests seen last year that hit the territory's economy.
MSCI's ex-Japan Asia-Pacific index .MIAPJ0000PUS fell
0.4%, as Hong Kong and mainland China shares extended declines.
Hong Kong's Hang Seng .HSI fell 1.0% and mainland shares
.CSI300 were down 0.8%, amid fears the protests would worsen
tensions between the United States and China.
MSCI's index of the world's 49 stock markets .MIWD00000PUS
was flat but still close to two-and-a-half-month highs reached
on hopes of economic recovery in the developed world as
countries ease social restrictions.
Oil prices fell amid U.S.-China tensions and concern over
how quickly fuel demand will recover as lockdowns ease. Brent
crude LCOc1 futures dropped 1.5%, to $35.62. U.S. West Texas
Intermediate crude futures CLc1 were down 1.6%, at $33.79 a
barrel. O/R
Still, European shares remained buoyed by hopes for a post-
COVID-19 recovery. The STOXX 600 .STOXX added 0.4% to reach
its highest level since March 10. Britain's FTSE .FTSE gained
1% and the domestically focused FTSE 250 .FTMC hit an 11-week
high as thousands of retailers prepared to re-open on June 1
from a months-long shutdown.
The European Commission is set to introduce a plan to help
the European Union economy recover from its coronavirus slump
with a mix of grants, loans and guarantees exceeding 1 trillion
euros. "You have two elements going in the right direction. You
have the end of lockdown going quite well and PMI (purchasing
managers' index) data showing the ability of economies to
recover in the second half of the year is still there," said
Francois Savary, chief investment officer at Swiss wealth
manager Prime Partners.
"A lot of good news has been integrated in markets already,
but I wouldn't chase them higher as there's still some
complacency and there will be a consolidation."
E-Mini futures for the S&P 500 ESc1 rose 0.5% to near
their two-and-a-half-month high touched the previous day. The
index had cleared 3,000 points in Wall Street overnight before
pulling back, as some traders returned to the New York Stock
Exchange floor for the first time in two months. But China remained in focus after U.S. President Donald
Trump said on Tuesday that he was preparing to take action
against China this week over its effort to impose national
security laws on Hong Kong. Worsening relations between the world's two biggest
economies could further hobble global business activity, which
is already under pressure from the coronavirus pandemic.
The dollar, measured against a basket of currencies, rose
0.1% to 99.146 =USD . The Chinese yuan weakened to the lowest levels since early
September in both onshore and offshore trade. The onshore
renminbi slipped 0.3 to as low as 7.1595 per dollar CNY=CFXS ;
the offshore currency fell 0.4% to 7.1760 per dollar CNH= .
The euro dropped 0.2% to $1.0961 EUR=EBS , as investors
waited for the European Commission to release details of its
financial rescue fund.
The German 10-year government bond yield fell after reaching
a one-month high on Tuesday. It was last down 2 basis points at
-0.442% DE10YT=RR .
Italy's 10-year government bond yield barely changed, last
at 1.552% IT10YT=RR . U.S. Treasury yields rose, with ten-year yields US10YT=RR
at 0.687%, up about 4 basis points from Tuesday.
Gold prices XAU= dropped to a two-week low, before paring
some losses to trade down 0.1% to $1,79.00 per ounce. GOL/

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(Editing by Larry King)