GLOBAL MARKETS-Shares slip on fear of worsening U.S.-China ties; gold surges

(Adds oil settlement prices)
* U.S. stocks mostly shrug off heightened U.S.-China
tensions
* Euro hits 21-month high of $1.1599
* Silver soars to 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
slid 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 on the European
Union's massive recovery fund.
Trading was choppy following the consolidation of recent
equities gains in many bourses around the world. But the order
for Beijing to shut its Houston consulate in three days spurred
risk-off sentiment and drove investors to assets offering
relative safety, such as gold and silver.
MSCI's benchmark for global equity markets .MIWD00000PUS
fell 0.08% and the euro EUR= rose 0.35% to $1.1566, a 21-month
high, a day after the EU approved a $750 billion euro ($857
billion) landmark stimulus package for the 27-nation bloc.
Silver jumped almost 8% XAG= to a six-year high of just
over $23 an ounce before retreating slightly. The price of gold
XAU= , which has topped $1,870 an ounce, has doubled since
financial markets' frantic spiral downward in March. Spot prices
are just $50 less than their all-time peak in September
2011. GOL/
Gold is seen as a hedge against inflation and fears of
currency debasement as governments and major central banks pump
massive stimulus into the economy.
But the question remains whether the U.S. 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.-China
relations, the potential economic fallout from the coronavirus
pandemic and uncertainty over the U.S. presidential election.
"Yet the (stock) market continues to climb higher. And it's
telling investors these risks don't need to be addressed," he
said.
In equities markets, a boost from Microsoft shares and
optimism over a new round of stimulus for the virus-stricken
U.S. economy offset worries over worsening ties between the
world's two largest economies.
Europe's broad FTSEurofirst 300 index .FTEU3 closed down
0.94% on U.S.-China jitters, but on Wall Street the Dow Jones
Industrial Average .DJI rose 0.31%, the S&P 500 .SPX gained
0.27% and the Nasdaq Composite .IXIC dropped just 0.09%.
The dollar index =USD , which gauges the dollar against a
basket of major world currencies, fell 0.15% at $94.9830.
China's offshore yuan weakened past 7 per dollar on the
Houston consulate news, and was last at 7.0128 CNH=EBS .
China Foreign Ministry spokesman Wang Wenbin told a regular
daily news briefing that the United States had abruptly told
Beijing on Tuesday to close the 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.
In debt markets, Italy's government bond market borrowing
costs were 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 the 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 slid 3 cents to settle at $44.29
a barrel. U.S. crude futures CLc1 settled down 2 cents at
$41.09 a barrel.