* Banking shares lead rally in U.S., Europe
* Hong Kong, China shares hit by new protests
* Brent crude futures slip 4%
* World FX rates in 2019: http://tmsnrt.rs/2egbfVh
By Herbert Lash
NEW YORK, May 27 (Reuters) - The euro and equity markets
advanced on Wednesday as enthusiasm for the European Union's
plans for a 750 billion euro ($823 billion) recovery fund offset
concerns about unrest in Hong Kong over Beijing's proposed
national security laws.
U.S. Treasury yields retreated from gains on the European
Commission's proposed stimulus plan to bolster economies ravaged
by the coronavirus pandemic, which had boosted risk appetite and
reduced demand for safe-haven bonds and gold.
The commission's plan also includes 1.1 trillion euros for
the EU's next long-term budget that would contribute to the
recovery fund that is aimed especially at Italy and Spain.
News of the plan underpinned a broad market rally in Europe
as bank stocks, which typically track the economic outlook,
provided the biggest boost to equities. Euro zone banks .SX7E
climbed 4.8%, with French lenders BNP Paribas SA BNPP.PA and
Societe Generale SA SOGN.PA leading gains.
The banking sector also performed well on Wall Street.
Bank of America BAC.N and JP Morgan Chase & Co JPM.N led
the U.S. banking sector .SPSY up 3.31%.
Equities are being driven by large flows of money entering
the economy, said David Kelly, chief global strategist at
JPMorgan Asset Management.
"You got a huge amount of liquidity with nowhere to go,"
Kelly said.
However, the market is assuming a bit more positive news
than is actually going to come down the pike this year and well
into 2021, he said.
"We will see a start of a recovery, but it shouldn't be
misinterpreted," Kelly said. "We're not going to get back to
full employment or even an unemployment rate below 10% any time
this year and maybe it will take most of next year."
MSCI's gauge of stocks across the globe .MIWD00000PUS
gained 0.63%, while the pan-European STOXX 600 index .STOXX
closed up 0.24%.
On Wall Street, the Dow Jones Industrial Average .DJI rose
337.62 points, or 1.35%, to 25,332.73 on rising financials and
industrial stocks. The broader S&P 500 .SPX gained 25.81
points, or 0.86%, to 3,017.58 and tech-heavy Nasdaq Composite
.IXIC added 27.54 points, or 0.29%, to 9,367.76.
Tech heavyweights Amazon.com AMZN.O , Microsoft Corp
MSFT.O and Facebook Inc FB.O weighted on the Nasdaq, while
healthcare .SPXHC and technology stocks .SPLRCT weighed on
the S&P 500. Technology and healthcare have outperformed during
the coronavirus-led market slump. U.S. Secretary of State Mike Pompeo said he had certified
Hong Kong no longer warrants special treatment under U.S. law as
it did under British rule, the latest salvo at China's plans to
impose new security legislation on the territory. President Donald Trump now must decide to end some, all or
none of the U.S. economic privileges that Hong Kong enjoys.
Crude prices slid on the news as the growing U.S.-Sino
tensions could weigh on global businesses and oil demand, which
already has been hit by the coronavirus pandemic. Concerns about
the pace of recovery also drew the attention of investors.
U.S. crude CLc1 settled down 4.48% to $32.81 per barrel
and Brent LCOc1 was at $34.74, down 3.95% on the day.
The euro has struggled since falling in March, when
investors rushed for the safety of dollars. But analysts say the
recovery fund proposals, if they can win over EU members
skeptical of an earlier Franco-German plan, could push the euro
higher. The dollar index =USD rose 0.067%, with the euro EUR= up
0.06% to $1.0987. The Japanese yen JPY= weakened 0.13% versus
the greenback at 107.71 per dollar.
MSCI's ex-Japan Asia-Pacific index .MIAPJ0000PUS fell
overnight 0.4% as Hong Kong and mainland China shares extended
declines. Hong Kong's Hang Seng .HSI fell 1.0% and mainland
shares .CSI300 were down 0.8 amid fears the protests would
worsen antagonism between the United States and China.
Benchmark 10-year notes US10YT=RR fell 2.6 basis points to
yield 0.6802%.
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GRAPHIC-Asia stock markets https://tmsnrt.rs/2zpUAr4
GRAPHIC-Asia-Pacific valuations https://tmsnrt.rs/2Dr2BQA
GRAPHIC-World FX rates http://tmsnrt.rs/2egbfVh
GRAPHIC-MSCI All Country World Index Market Cap http://tmsnrt.rs/2EmTD6j
GRAPHIC-Emerging markets http://tmsnrt.rs/2ihRugV
GRAPHIC-Global assets in 2020 http://tmsnrt.rs/2jvdmXl
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