(Adds oil, gold settlement prices)

* China’s Hong Kong security law rattles markets

* Stocks slip, oil prices tumble more than 4%

* Graphic: World FX rates in 2020 http://tmsnrt.rs/2egbfVh

By Herbert Lash and Dhara Ranasinghe

NEW YORK/LONDON, May 22 (Reuters) – Oil prices tumbled and
global equity markets wavered on Friday as China’s move to
impose a new security law on Hong Kong further strained
U.S.-Sino relations and clouded economic recovery prospects.

News that China also dropped its annual growth target for
the first time added to uncertainty about fallout from the
COVID-19 pandemic, boosting safe-haven investments such as U.S.
Treasuries and the dollar.

China said it would impose new national security legislation
on Hong Kong, leading U.S. President Donald Trump to warn that
Washington would react “very strongly” against any attempt to
gain more control over the former British colony.

Emerging market shares slid -2.72%. But stocks in Europe
closed mostly flat and on Wall Street traded mixed to higher as
investors prepared for a long weekend in the United States, the
UK and elsewhere.

After trading lower most of the session, Wall Street trended
upward in late trading.

“The market just keeps battling higher, it just wants to go
higher,” said Tim Ghriskey, chief investment strategist at
Inverness Counsel in New York. “It’s anticipating improvement
and we’ve seen all the bad news.”

Tensions between the world’s two largest economies have
risen in recent weeks, with Washington ramping up criticism of
China over the origins of the pandemic, raising fears the
rhetoric could crimp economic growth.

“You have these doubts over China that is triggering this
sell-off in oil, and it’s going to gain steam. If oil sells off,
it’s hard to have a strong stock market,” said Ed Moya, senior
market analyst at OANDA in New York.

Of major asset classes, crude oil has rebounded the most off
the year’s lows on hopes world economies will soon recover from
coronavirus-induced business shutdowns, he said, addin that he
believed oil’s rally was overdone.

“There’s just too much uncertainty, and that’s going to
likely keep on weighing on risk appetite,” Moya said.

MSCI’s all-country world stock index shed
0.48%, while the pan-European STOXX 600 index lost
0.03%.

On Wall Street, the Dow Jones Industrial Average fell
42.39 points, or 0.17%, to 24,431.73. The S&P 500 gained
2.67 points, or 0.09%, to 2,951.18 and the Nasdaq Composite
added 27.73 points, or 0.3%, to 9,312.61.

Earlier in Asia, Hong Kong’s Hang Seng index slid
more than 5% to a seven-week low, its biggest daily percentage
fall since 2015. MSCI’s broadest index of Asia-Pacific shares
outside Japan lost 2.7%; Japan’s Nikkei
fell 0.8%.

Analysts said extensive central bank stimulus continues to
underpin sentiment and buoy equity markets.

Japan’s central bank unveiled a lending program to channel
nearly $280 billion to small businesses hit by the coronavirus.
India slashed rates for a second time this year and the European
Central Bank, in the minutes from its last meeting, said it was
ready to expand emergency bond purchases as early as June.

U.S. crude fell 67 cents to settle at $33.25 a
barrel, paring about half earlier losses of more than 5%.

Brent settled at $35.13, down 93 cents on the day.

The dollar index rose 0.33%, with the euro
down 0.43% to $1.0902. The Japanese yen strengthened
0.05% versus the greenback at 107.57 per dollar.

Benchmark 10-year U.S. Treasury yields fell 2.4 basis points
to 0.6526%. Spot gold added 0.6%.

U.S. gold futures settled up 0.8% at $1,735.50 an
ounce.

(Reporting by Dhara Ranasinghe; Editing by Jane Merriman,
Kirsten Donovan, Chizu Nomiyama, Dan Grebler and David Gregorio)