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UPDATE 2-Hong Kong battens down for Halloween protest night

* First time protesters have targeted famous party district

* Police warn of safety risks from banned march

* Data set to show recession as central banks cuts rates

* Pompeo says China trampling on rights in Hong Kong (Adds HK stock exchange chief, paragraph 11; British to release report on Hong Kong, paragraph 12)

HONG KONG, Oct 31 (Reuters) - Hong Kong police tightened security ahead of possible clashes on Thursday between masked "Halloween" pro-democracy protesters and fancy-dress clubbers in the narrow, hilly streets of a popular party district in the heart of the Chinese-ruled city.

The demonstrators, many of whom still wear now-illegal face masks, are planning to march from Victoria Park in the Causeway Bay shopping district to the Lan Kwai Fong bar and entertainment area near Central, the scene of a deadly New Year's stampede nearly 27 years ago.

Police have banned the march and said they would close roads, including the short, sloping Lan Kwai Fong strip itself, from early afternoon until Friday morning to "facilitate the public celebrating." It was not immediately clear how that would work.

It is the first time protesters have targeted the party district in five months of increasingly violent, anti-government unrest. Typically, weekends and special events like Halloween see hordes of revellers spilling out of the bars and clubs.

A stampede during New Year celebrations at the end of 1992, when thousands had gathered on streets slippery with beer and champagne, killed at least 20 people and wounded scores.

Police, who have been warning for days of the threat to public order and safety, are planning to deploy 3,000 riot officers and three water cannon outside government offices near the route, according to media.

Protesters are angry at what they see as Beijing's increasing interference in Hong Kong, which returned from British to Chinese rule in 1997 under a "one country, two systems" formula intended to guarantee freedoms not seen on the mainland.

China denies meddling and has accused foreign governments, including the United States and Britain, of stirring up trouble.

U.S. Secretary of State Mike Pompeo said on Wednesday that China was "trampling (on) the most basic human rights of its own citizens".

"We have seen this in Hong Kong, where they need to live up to their promises and commitments," Pompeo said.

"EXCEPTIONAL TIMES"

Hong Kong Stock Exchange chief Charles Li said there were fundamental flaws in the "one country, two systems" formula, a rare public condemnation of the system.

Britain was due to release its six-monthly report on Hong Kong later in the day, likely to be critical of Communist Party rulers in Beijing, but it was not immediately clear what clout Britain has over the second biggest economy in the world, especially with Britain hoping for a post-Brexit boost in Chinese investment and trade.

Some protesters in Hong Kong have thrown petrol bombs at police, lit fires across the Asian financial hub and trashed buildings and businesses, especially those seen as pro-Beijing, during recent demonstrations.

Police have responded with tear gas, pepper spray, rubber bullets and water cannon. Some bar owners told Reuters that the police have however pledged to take a low profile on the fringes of the Halloween celebrations.

"We don't expect any trouble," said Jay Chandra, manager of the Watering Hole on Lan Kwai Fong. "Police said they would stay away, but if there was any problem they would come."

But one manager of a top-end, high-rise bar, who did not want to be identified, said it would be "madness" not to be worried and that he hoped to be able to send his staff home early.

Hong Kong's subway operator MTR Corp said it would shut some stations earlier than usual. Central station, a few minutes walk from Lan Kwai Fong, will shut by 9 p.m. (1300 GMT).

Prince Edward station, on the bustling Kowloon peninsula, would be shut from 2 p.m. as protesters planned a vigil to mark two months since large clashes between police and protesters.

A Hong Kong island theme park, Ocean Park, said it was cancelling its annual Halloween festival to ensure safety of visitors and staff.

This month Hong Kong leader Carrie Lam banned protesters from wearing face masks under a British colonial-era emergency law, but the measure has been largely ignored.

Halloween masks have not been banned, which would make it difficult for police to differentiate protesters from revellers in fancy dress.

Economic data due later on Thursday is set to show that Hong Kong has slid into its first recession since the 2008 global financial crisis as the protests, trade tensions and global pressures weigh. Its central bank also cut rates on Thursday in step with the U.S. Federal Reserve.

Pressed on government plans to relieve the hit to businesses in Hong Kong from the protests, Lam told a conference the circumstances warranted "exceptional" measures.

"If we still act in the same conventional mode as if business is usual and life is normal, then we are not being very responsible," she said.

Her administration has pledged around HK$21 billion ($2.68 billion) of financial aid for business since August, from rent to fuel subsidies. (Reporting by Nick Macfie, Twinnie Siu, Jessie Pang and Tom Westbrook; Writing by Farah Master and John Geddie; Editing by James Pomfret, Kim Coghill, Raju Gopalakrishnan)