UPDATE 2-European stocks flat as U.S.-China woes weigh, but post weekly gain

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* Trump warns of "strong reaction" to Beijing's HK move

* Asia-focused Prudential top decliner on the STOXX 600

* Burberry gains after views on Asia recovery
(Updates to market close)

By Sruthi Shankar

May 22 (Reuters) - European shares closed unchanged on
Friday although rising U.S.-China tensions hit Asia-exposed
banks and luxury stocks, while hopes of a global recovery kept
weekly gains intact for the main indexes.

Stock markets had a volatile session as Beijing planned to
impose a new security law in Hong Kong, raising prospects of
fresh protests in the global financial hub and drawing a warning
from U.S. President Donald Trump that Washington would react
"very strongly".

Asia-focused British life insurer Prudential tumbled
9.3% to the bottom of the pan-European STOXX 600 index,
which closed unchanged on the day.

HSBC Holdings Plc and Standard Chartered
fell 5% and 2.4% respectively.

Rising tensions between the world's two largest economies
have stalled a recovery in equity markets in recent weeks, with
Trump accusing China of mishandling the coronavirus outbreak.

"The U.S. has ratcheted up pressure on China on several
fronts and has sapped risk appetite ahead of the weekend," said
Marc Chandler, managing director at Bannockburn Global Forex.

Still, the STOXX erased early losses of as much as 1.7% as
media stocks gained 1.3% and euro zone banks
rebounded from record low levels.

Cyclical sectors such as miners, travel & leisure
and automakers have outperformed this week,
helping the STOXX 600 post its best week since April 10 on hopes
that easing of coronavirus-driven lockdowns will spur a swifter
economic recovery.

Britain's Burberry rose 3.3% as its chief executive
said the company was encouraged by a "strong rebound in some
parts of Asia" and is well-prepared to navigate through the
COVID-19 situation.

German real estate companies LEG Immobilien and
TAG Immobilien rose 0.8% and 6.6% respectively after
LEG said the companies were in talks about a potential
combination of their businesses.

Oil stocks slipped on the back of falling crude
prices as China dropped its annual growth target for the first
time, stoking concerns of demand in the world's second-largest
oil user.

The oil-heavy Norwegian index fell 1.6%

Luxury goods makers including LVMH and Kering SA
, which draw a major part of their revenue from China,
fell about 2%. Cartier maker Richemont dropped 4.2%.

Most markets in UK and the U.S. are closed on Monday for
public holidays.
(Reporting by Sruthi Shankar in Bengaluru; Editing by Shounak
Dasgupta, Bernard Orr; Editing by Kirsten Donovan)