GLOBAL MARKETS-Asian shares defy global rally as Hong Kong unrest rattles investors

* Hopes of economic re-opening support developed market
shares
* Hong Kong, China shares hit by new protests
* Yuan falls to lowest since September
* S&P500 mini futures near Tuesday's high
* European shares seen rising 0.3%

By Hideyuki Sano and Koh Gui Qing
TOKYO/NEW YORK, May 27 (Reuters) - Fresh political unrest in
Hong Kong over Beijing's proposed national security laws in the
city hit Asian share markets on Wednesday, even as optimism
about the re-opening of the world economy supported a broader
global stock rally.
Riot police in the Asian financial hub fired pepper pellets
on protesters in the main business district, rekindling concerns
about the disruptive protests seen last year that hit the
territory's economy. That capped regional stocks with MSCI's ex-Japan
Asia-Pacific index .MIAPJ0000PUS losing 0.12%, as Hong Kong
and mainland China shares extended declines.
Hong Kong's Hang Seng .HSI lost 1.0% while mainland
shares .CSI300 were down 0.5%, amid fears the protests would
worsen diplomatic and trade tensions between the United States
and China.
Elsewhere, however, investors were still buoyed by optimism
about a post COVID-19 recovery.
European stocks are expected to rise with pan-European Euro
Stoxx 50 futures STXEc1 up 0.3%. German DAX futures FDXc1
rose 0.5%, FTSE futures FFIc1 were up 0.5%.
"Macro hedge funds are covering their short positions in
developed markets' stocks as their bet on a second wave of the
coronavirus and a double bottom in markets have not
materialised," said Masanari Takada, cross asset strategist at
Nomura Securities.
E-Mini futures for the S&P 500 ESc1 rose 0.7% to edge near
their 2-1/2-month high touched the previous day, as the index
tackle a major chart point of its 200-day moving average.
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.
Japan's Nikkei .N225 rose 0.7% to 2-1/2-month highs while
Australian shares .AXJO hit a similar milestone before giving
up most of gains.
The index of world's 49 stock markets .MIWD00000PUS stood
near 2-1/2-month highs, having gained 2.7% so far this month on
hopes of economic recovery in the developed world as countries
ease social restrictions.
Economic data published on Tuesday showed U.S. consumer
confidence nudged up in May and new home sales beat
expectations.
"We have seen a clear sign of rising expectations in
economic recovery. Now we are beginning to see evidence of
various stimulus supporting the economy," said Toshifumi
Umezawa, strategist at Pictet.
But the China focus remains a key weight for sentiment after
U.S. President Donald Trump on Tuesday said 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 intense pressure due to the coronavirus
pandemic.
The Chinese yuan also 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
while the offshore unit fell 0.4% to 7.1760 per dollar CNH= .
The yuan's fall also weighed on risk-sensitive currencies.
The Australian dollar slipped 0.2% to $0.6640 AUD=D4 .
The euro dipped 0.2% to $1.0955 EUR= while the yen barely
moved at 107.52 per dollar JPY= .
U.S. Treasury yields retreated from lows, with ten-year
yields US10YT=RR at 0.692%, having risen about 4 basis points
on Tuesday.
Gold prices dipped slightly XAU= to $1,707.5 per ounce,
slipping further from 7 1/2-year high of $1,764.8 touched last
week.
Oil prices slipped slightly on concerns about U.S.-China
tensions with U.S. West Texas Intermediate crude futures CLc1
down 0.6% at $34.14 per barrel.

(Editing by Sam Holmes)