(New version, addition of European Open, update of prices)
* World stocks weaken after hitting record highs
* Sterling hit as investors get nervous about Brexit
* Trump is preparing sanctions against some Chinese officials
* Dollar index rises, EU bond yields fall, oil falls
* Asset performance 2020 http://tmsnrt.rs/2yaDPgn
* Worldwide exchange rates in 2020 http://tmsnrt.rs/2egbfVh
By Danilo Masoni and Swati Pandey
MILAN / SYDNEY, December 7 (Reuters). World stocks and other risk-weighted assets fell Monday as the growing risk of a no-deal Brexit hit the pound hard and new tensions between China and the US offset bets on more fiscal and central bank-related stimulus in Europe and the United States.
After hitting a new all-time high on Monday, the MSCI World Equity Index, which tracks stocks in 49 countries, fell 0.3% to 0919 GMT.
European stocks fell 0.6% in early trading after losses in Asia on a Reuters report that Washington was preparing sanctions against Chinese officials for their alleged role in Beijing disqualifying elected opposition lawmakers in Hong Kong.
The E-Mini-Futures for the S&P 500 were down 0.5%.
The main source of fear in Europe was the Brexit trade talks, which faltered as London and Brussels tried to bridge significant differences in one final attempt to avoid a disorderly exit by the end of the year.
Other potentially market-moving events were also considered, starting with an EU summit starting Thursday to break a dead end on a € 1.8 trillion coronavirus bailout, and the ECB’s final political meeting of the year on the same day .
“To say this week will be a crunch week with many high-risk events and potentially binary outcomes is an understatement,” said Arne Petimezas, analyst at AFS Group.
“While the week could be filled with high risk events, the markets are so high in terms of central bank and central bank liquidity that nobody really seems to care,” he added.
World stocks had risen initially on Monday in hopes of a faster global recovery as coronavirus vaccines roll out in the UK starting this week.
Hopes that the vaccines will help contain the pandemic that has killed more than 1.5 million people around the world has seen stocks surge in recent weeks.
In addition, expectations for a US stimulus package picked up pace following weak salary data on Friday after months of deadlocked negotiations.
A bipartisan group of Democrats and Republicans proposed a compromise package of 900 million, which leaders on both sides seem to be able to agree to.
On currencies, the pound was under severe pressure and risk currencies fell as the lack of progress in Brexit talks clouded hopes that UK and EU negotiators will be able to strike a trade deal before a transition period ends this month ends.
The pound sterling fell 1.2% against the dollar to $ 1.3263 and fell 0.1% against the euro to 0.9121, while the overnight and one-week implied volatility indicators rose above 17% and over, respectively. 14% rose as traders braced themselves for further fluctuations.
Irish Prime Minister Micheal Martin said the chances of a deal were 50-50 on Sunday, while bank JPMorgan said the likelihood of getting out of a no-trade deal had increased from 20% to a third.
“There is still a deal to be closed, but with the odds near 50:50, it’s no wonder that option demand appears to be geared towards downside strikes,” said Jeremy Stretch, director of G10 FX strategy at CIBC Capital Markets.
British Prime Minister Boris Johnson and the President of the European Commission, Ursula von der Leyen, will review the situation on Monday evening.
Meanwhile, the US dollar was up 0.4% against a basket of currencies to 91.19 after hitting a 2-1 / 2 year low last week.
Brexit tensions have also raised European bond prices and lowered yields. The yield on the German 10-year Bund fell to a one-week low of -0.58%, which was also weighed down by expectations that the ECB would announce further stimulus later this week.
In commodities, oil prices slid from their highest level since March as a sustained surge in coronavirus cases around the world forced a series of re-locks, including tough new measures in Southern California.
U.S. crude fell 1.7% to $ 45.46 a barrel and Brent 1.5% to $ 48.49. Brent has lost around a quarter of its value so far this year. (Reporting by Danilo Masoni and Swati Pandey, additional reporting by Joice Alves in London; editing by Kirsten Donovan)