GLOBAL MARKETS-Shares waver on fear of worsening US-China ties; gold surges

* U.S. stocks mostly shrug off heightened U.S.-Sino tensions
* Euro hits 21-month high of $1.1599
* Silver soars to a six-year peak, gold at nine-year high
* World FX rates in 2020 http://tmsnrt.rs/2egbfVh
* Asian stock markets: https://tmsnrt.rs/2zpUAr4

By Herbert Lash and Marc Jones
NEW YORK/LONDON, July 22 (Reuters) - World equity markets
were little changed and gold rose on Wednesday after the U.S.
ordered China to close its consulate in Houston, fanning fears
of worsening bilateral relations, while the euro gained further
on the European Union's massive recovery fund.
Trading was choppy as many bourses around the world had been
consolidating recent gains in equities. But the order for
Beijing to shut its Houston consulate in three days spurred
risk-off sentiment and a move to assets offering relative
safety, such as gold and silver.
MSCI's benchmark for global equity markets .MIWD00000PUS
fell 0.11% and the euro EUR= rose 0.49% to $1.1583, a 21-month
high.
Silver made another 7% leap XAG= to a six-year high of
just over $23 an ounce, while gold's XAU= top of $1,865 an
ounce almost doubled its price from the depths of March. GOL/
The surge in precious metals came amid China's growing
demand for physical assets as gold is seen as a hedge against
inflation and fears of currency debasement, and on the massive
pumping of government and central bank stimulus into the
economy.
The question is whether the Federal Reserve has limited or
even eliminated investors' needs to address market risk, said
Yousef Abbasi, global market strategist at StoneX Group Inc.
"We face several different challenges and the tail risks are
getting higher and higher," Abbasi said, pointing to U.S.-Sino
relations, the potential economic fallout from the coronavirus
and uncertainty over the U.S. presidential election.
"Yet the market continues to climb higher. And it's telling
investors these risks don't need to be addressed," he said.
A boost from Microsoft shares and optimism about another
round of stimulus for the virus-stricken U.S. economy countered
worries over worsening ties between the world's two largest
economies.
Europe's broad FTSEurofirst 300 index .FTEU3 closed down
0.94% but on Wall Street, the Dow Jones Industrial Average
.DJI rose 0.19%, the S&P 500 .SPX gained 0.18% and the
Nasdaq Composite .IXIC added 0.01%.
The dollar index =USD , a basket of the main world
currencies, fell 0.24% at $94.9040 and was poised to break
through its March lows.
China's offshore yuan weakened past 7 per dollar on the
Houston consulate news and was last at 7.0028 CNH=EBS .
China's foreign ministry spokesman Wang Wenbin told a
regular daily news briefing that the United States had abruptly
told Beijing on Tuesday to close its consulate U.S. officials said the step had been taken to protect
American intellectual property and information -- U.S. media
reports in Houston on Tuesday said documents were being burned
in a courtyard at the consulate -- but Beijing condemned the
order and threatened retaliation.
"We urge the U.S. to immediately revoke this erroneous
decision," China's foreign ministry said. A source later told
Reuters that China was considering closing the U.S. consulate in
Wuhan.
Italy's government bond market borrowing costs were also at
their lowest since March on the improved EU recovery fund
sentiment. Rating agency S&P Global called the joint debt
element of the deal a boost for EU's sovereign ratings.
"The story is not over yet, but the establishment of a
shared fiscal mechanism is a breakthrough for EU sovereign
creditworthiness," one of S&P's top sovereign analysts, Frank
Gill, said.
Copper prices drooped 1.3% after the Houston headlines
CMCU3 . Shanghai SCFcv1 and Dalian iron ore futures DCIOcv1
rose for a second straight session on expectations of strong
Chinese demand. MET/L IRONORE/
Brent crude futures LCOc1 fell $0.41 to $43.91 a barrel.
U.S. crude futures CLc1 slid $0.41 to $41.51 a barrel.