* Hong Kong law hurts optimistic mood
* World stocks fall after approaching record high
* Yen rises from six-month low to dollar; bonds rally
* Pound gains after poll shows Conservatives winning
majority
(Updates throughout, changes byline, dateline)
By Sujata Rao
LONDON, Nov 28 (Reuters) - A four-day rally that had lifted
world stocks to near-record highs stalled on Thursday as a U.S.
bill backing Hong Kong's protesters became law, provoking
China's ire and threatening to derail an interim trade deal
between Washington and Beijing.
Fading hopes of a rapprochement between the world's two
biggest economies before additional, potentially damaging tariff
hikes kick in, also helped safe-haven assets such as U.S. and
German bonds and lifted the yen from six-month lows.
The U.S. legislation, which threatens sanctions for human
rights violations and seeks to safeguard Hong Kong's autonomy,
prompted China to warn of "firm counter measures".
"The risk-off moves clearly reflect a concern this could be
an impediment to the 'Phase One' trade deal which is now widely
expected," said Adam Cole, a strategist at RBC Capital Markets.
Wall Street's main indexes closed at record levels for a
third straight day on Wednesday, albeit in thin liquidity before
the Thanksgiving holiday, after data showed U.S. economic
growth had picked up in the third quarter and consumer spending
had increased.
Elsewhere, though, the outlook for growth looks less rosy.
Japanese retail figures slumped the most since 2015 as a sales
tax hike dragged on the economy, exacerbating a slowdown caused
by slowing exports and manufacturing That took Asian shares excluding Japan down 0.2%
.MIAPJ0000PUS . Japan's Nikkei .N225 , Hong Kong's Hang Seng
.HSI and Shanghai blue chips .CSI200 all closed weaker. A
pan-European index opened 0.2% lower, led by trade-sensitive
sectors such as autos and tech .SXAP .SX8P .
That kept MSCI's world equity index flat, after it
approached the record reached in January 2018. However, the
index is up almost 3% so far in November and is on track for the
best month since June as investors flit in and our depending on
the trade news .MIWD00000PUS .
"People don't want to be caught on the wrong side," said
Geoff Yu, head of the UK investment office at UBS Wealth
Management. "It does reflect there's cash on the sidelines. If
you can stretch the positive narrative, if the trade issue is
out of the way for the time being, we might actually see a
demand pick up."
U.S. markets are closed for Thanksgiving, but equity futures
for all three major indexes were down around 0.3% ESc1 YMc1
NQc1 .
HONG KONG AND BREXIT JITTERS
Jitters over a renewed Sino-U.S. fracas also showed up in
currency and bond markets. U.S. bond markets are closed, but
German yields fell to their lowest in nearly a month, down 1.5
basis points on the day DE10YT=RR
Japan's yen, a currency investors flock to in times of
trouble, gained 2% against the dollar JPY=D3 , rising as high
as 109.40 yen per dollar. The Australian dollar AUD= and the
offshore Chinese yuan lost around 0.2% CNH=D3 .
The British pound GBP= rose on Wednesday after a model for
pollsters YouGov, which accurately predicted the 2017 election,
said Prime Minister Boris Johnson was on course to win a
majority in parliament at the Dec. 12 election.
However, the currency failed to build on its gains, trading
around $1.294. It was flat versus the euro after surging to its
highest in nearly seven months at 85 pence EURGBP=D3 .
Implementing Brexit by the end of January, as Johnson had
promised, would leave him a "miniscule" 11 months to agree a
trade deal with the European Union, analysts at Societe Generale
told clients.