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GLOBAL MARKETS-Stocks drop as Hong Kong violence rattles investors

Published 2019-11-11, 07:05 a/m
Updated 2019-11-11, 12:00 p/m
GLOBAL MARKETS-Stocks drop as Hong Kong violence rattles investors

* MSCI world index falls 0.2%

* Hong Kong violence escalates in rare daytime clashes

* Hang Seng index loses almost 3%

* European shares down 0.4%

* Gold and yen gain; trade war worries also weigh

* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh (Updates prices throughout, adds sterling)

By Tom Wilson

LONDON, Nov 11 (Reuters) - Shares around the globe fell on Monday, buffeted by escalating violence in Hong Kong that pushed Asian stocks to their worst day since August and stoked demand for the safe-haven yen and gold.

In the 24th straight week of pro-democracy unrest, Hong Kong police shot and wounded a protester as the Chinese-ruled territory saw rare working-hours violence. MSCI world equity index .MIWD00000PUS , which tracks shares in 47 countries, slipped 0.2%, with Hong Kong's Hang Seng index .HSI falling 2.6% and leading losses across Asia.

There, MSCI's widest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS fell 1.2% from six-month highs to set a course for its worst day since late August. Chinese blue chips .CSI300 dropped 1.8%.

The nerves spread to Europe, too.

The broad Euro STOXX 600 .STOXX fell 0.4%, with London shares .FTSE losing 1.1%. Wall Street futures gauges also suffered, suggesting losses of around 0.4% ESc1 .

Some investors said markets could be affected by any further escalation of the violence in Hong Kong, where protesters are angry about what they see as police brutality and meddling by Beijing in the freedoms guaranteed to the former British colony.

"At some stage I think it is likely that there will be a more fully-fledged crackdown," said Stéphane Barbier de la Serre, a strategist at Makor Capital Markets.

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"And if you see a crackdown, you could see markets collapsing."

The violence sent investors running for assets perceived as safe havens and away from riskier currencies.

Gold XAU= rose 0.5%, rebounding from a three-month low touched on Friday to reach $1,465.36 per ounce.

The Japanese yen JPY=EBS , which often strengthens in times of global political or economic turmoil, strengthened 0.3% against the dollar. China's yuan, in contrast, weakened 0.3% to 7 per dollar in offshore trade CNH=EBS .

Sterling GBP=D3 gained 0.3% against the dollar after figures showed that Britain's economy had dodged a recession - but grown at its slowest annual pace in almost 10 years. was last trading at $1.28.

The GDP data compounded a warning from Moody's on Friday that it might cut its rating on Britain's sovereign debt again, as it lowered the outlook on Britain's current rating to negative from stable. WAR

Investors were also focused on the U.S-China trade talks.

After a bout of optimism last week over prospects that Washington and Beijing could reach an initial deal to alleviate their 18-month old dispute, doubts gnawed at markets again.

On Saturday, U.S. President Donald Trump said talks had moved more slowly than he would have liked. He said reports that the United States was willing to lift tariffs were incorrect, adding that Beijing wanted a deal more than he did. some market players said Trump's comments fitted an established pattern of optimistic rhetoric being followed by a more sceptical tone.

A deal was still likely, they said.

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"It's the usual two steps forward and one step backwards," said Adam Cole, head of FX strategy at RBC Capital Markets.

"We are probably still moving in the direction (of a deal), and that's the way the market is priced on balance."

The uncertainty over trade weighed on commodities markets commodities.

Oil lost 1.3%, with concerns over trade and worries about oversupply weighed on the market. Brent crude was down 82 cents to $61.88 by late morning.

In Europe, Spanish government bond yields held their ground after a weekend election delivered a fractured parliament and set the stage for difficult talks to form a ruling coalition. far-right surged in the poll, the fourth in as many years. Spain's 10-year bond yield was flat at 0.40% ES10YT=RR .

Most other major bond yields across the euro zone were little changed, holding below highs reached on Friday as investors showed scant appetite for risk in the wake of the Hong Kong violence.

U.S. bond markets were closed for the Veteran's Day holiday.

For Reuters Live Markets blog on European and UK stock markets, please click on: LIVE/

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