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GLOBAL MARKETS-Stocks take a breather, Brexit weighs down sterling

* Sterling slips as UK PM describes Brexit deal as difficult

* Japan unveils $708 billion in fresh economic stimulus measures

* Investors stay on sidelines ahead of a vote in the U.S. Congress

* Graphic: 2020 asset performance tmsnrt.rs/2yaDPgn

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

LONDON, Dec 8 (Reuters) - World stocks sagged on Tuesday as investors struggled to keep the thundering rally of recent weeks going with COVID-19 infections still surging and London and Brussels stuck in Brexit purgatory.

Asia had nudged down amid renewed U.S.-China tensions and Europe’s main bourses went sideways as the Brexit drama offset news that a 90-year-old grandmother from Northern Ireland had become the first person to receive a COVID-19 vaccine outside a trial.

The pan-European STOXX 600 index barely budged, while sterling was wobbling again having tumbled as much as 1.6% on Monday due to the Brexit nerves.

A face-to-face meeting in Brussels between British Prime Minister Boris Johnston and European Commission President Ursula von der Leyen in the coming days is now seen as possibly the only way to salvage a trade deal.

“We’re always hopeful (of striking a deal) but you know there may come a moment when we have to acknowledge that it’s time to draw stumps and that’s just the way it is,” Johnson said on Tuesday referring to a cricketing term for the end of play.

MSCI’s broadest index of Asia-Pacific shares narrowed its losses from early trade as Japan announced a new $700 billion stimulus package, but was still down 0.1% as anxiety over the coronavirus pandemic also capped sentiment.

Among Asia’s top markets, Australian shares closed higher for a sixth straight session, lifted by data showing an improvement in business sentiment. The S&P/ASX 200 index rose 0.2% to 6,687.7, adding about 3% in the past six sessions.

However, Japan’s Nikkei 225 dipped 0.3% and Seoul’s Kospi gave back 1.6% of the searing 20% rally it has seen since the start of November.

Chinese blue-chips remained flat and Hong Kong’s Hang Seng dropped 0.6%, as Sino-U.S. tensions continued to weigh on the market.

Chinese Foreign Minister Wang Yi assured U.S. executives that Beijing remained committed to the Phase 1 trade deal with the United States. That came as a report showed China’s purchases of U.S. goods and services as of October, specified in the Phase 1 deal at $75.5 billion for 2020, was about half the level they should be on a pro-rated annual basis.

The United States also imposed financial sanctions and a travel ban on 14 Chinese officials over their alleged role in Beijing’s disqualification last month of elected opposition legislators in Hong Kong.

Chinese foreign ministry spokeswoman Hua Chunying hit back, saying Beijing would take “firm counter-measures against the malicious actions by the U.S. to safeguard our sovereignty, security and developmental rights”.

CONGRESS

On Wall Street, the Nasdaq Composite rose 0.45% while the Dow Jones Industrial Average dropped 0.5% and the S&P 500 lost 0.2%.

Some investors are watching whether U.S. policymakers can reinvigorate efforts to pass additional pandemic stimulus. The U.S. Congress is expected to vote this week on a one-week stopgap funding bill to give negotiators more time to strike a compromise, as the business community cautioned inaction could spur a deeper recession.

At the same time, California, the nation’s most populous state, announced new restrictions on travel and business activity after record case numbers and hospitalizations. Officials in New York warned similar restrictions could be employed soon, which further weigh on the nation’s recovery.

The dollar steadied against most currencies as investors eyed potential stimulus and vaccine development. An index that tracks the dollar against a basket of currencies was little changed at 90.829, not far from 90.471, its weakest since April 2018.

The Brexit-bound pound was down 0.3% in London at $1.3338 although that was well above Monday’s low of $1.3225.

In the bond markets, Euro zone government bond yields edged lower ahead of an expected new round of European Central Bank stimulus later this week, and as uncertainty remained over both Brexit and a European Union recovery fund.

A two-day EU summit begins Thursday, and the bloc is ready to set up its planned EU stimulus without Hungary and Poland, which are maintaining their veto of the EU budget.

British borrowing costs were down, after falling 7 basis points to 0.28% on Brexit worries on Monday. The benchmark 10-year Gilt yield dropped 1 basis point as did those on German Bunds which are at -0.592%.

Oil prices fell, extending losses from the previous session. Brent crude fell 0.3% and U.S. crude dipped 0.5%.

Prices had come under pressure after Reuters had reported the U.S. was prepping sanctions on Chinese officials over Hong Kong.

Spot gold prices were 0.22% higher at $1,867.70 per ounce, and U.S. gold futures settled up 0.31% at $1,871.7, as investors bet on more stimulus money being pumped into the financial system.

“The (global) economic system still needs significant policy support for the reasons we know,” said Joseph Little, Chief Global Strategist at HSBC GAM.

But “my sense at the moment is that we are in a phase of healing”.

Reporting by Marc Jones; editing by Philippa Fletcher

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