GLOBAL MARKETS-Stocks slip on U.S.-China tensions; oil rises to 2-1/2-month high

(Adds oil, gold settlement prices)

* Oil prices extend gains to 2-1/2 month high

* Dollar trying to snap four-day losing streak

* Bond markets digest glut of supply

* U.S. jobless claims 2.4 million, in line with estimates

By Herbert Lash and Marc Jones

NEW YORK/LONDON, May 21 (Reuters) – Global equities slid on Thursday on concerns about the long-term impact of the new coronavirus and renewed U.S.-China tensions, though oil markets ignored those worries and marched to a 2-1/2 month highs.

Bourses in London, Paris and Frankfurt fell around 1%, but Wall Street declined less than half that.

The dollar traded in a narrow range as investors weighed the impact of global business lockdowns and the euro’s four-day rally against the U.S. currency ran out of steam.

Gold fell more than 1% as a strong dollar pushed it off this week’s 7-1/2 year peak.

Rising tensions between Washington and Beijing gave investors pause.

President Donald Trump warned the United States would react “very strongly” against China trying to gain more control over Hong Kong through new national security legislation. U.S. Secretary of State Mike Pompeo on Wednesday called China’s $2 billion pledge to fight the pandemic “paltry.”

“The biggest threat to the U.S. market this year is actually the potential for ignition of the tariff war, between the U.S. and China,” said Kristina Hooper, chief global market strategist at Invesco in New York.

Stocks in the short run are driven by news flow, though bias is to the upside because of easy monetary policy from the Federal Reserve, Hooper said.

MSCI’s gauge of stocks across the globe shed 0.69%, while the pan-European STOXX 600 index lost 0.75%.

On Wall Street, the Dow Jones Industrial Average fell 95.48 points, or 0.39%, to 24,480.42. The S&P 500 lost 19.84 points, or 0.67%, to 2,951.77 and the Nasdaq Composite dropped 72.40 points, or 0.77%, to 9,303.38.

Purchasing manager index surveys (PMIs) in Europe confirmed economic activity has begun to return, though they were far from stellar.

Euro zone-wide figures came in better than expected overall but Germany’s improvement undershot forecasts. It was the third month in a row that the surveys were plonked firmly in economic contraction territory.

Oil rose on the view that slumping fuel demand should rebound. Brent, the international benchmark, has bounced up $20 a barrel over the past month.

U.S. crude futures rose 43 cents to settle at $33.92 a barrel, while Brent settled up 31 cents at $36.06 a barrel.

The market absorbed the latest glut of government debt to pay for coronavirus support programs fairly smoothly. The United States on Wednesday auctioned $20 billion of 20-year debt, the first such sale since 1986.

Italy sold roughly the same on Thursday and Spain said it will need to raise almost 100 billion euros more than planned.

The benchmark U.S. 10-year notes fell 0.4 basis points to yield 0.6736%.

U.S. weekly jobless claims came in at a seasonally adjusted 2.4 million, in line with a Reuters survey of economists ahead of the data and well off the record 6.867 million at the end of March.

The dollar index rose 0.22%, with the euro down 0.23% to $1.0952. The Japanese yen weakened 0.13% versus the greenback at 107.68 per dollar.

U.S. gold futures settled 1.7% lower at $1,721.90 an ounce.

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