GLOBAL MARKETS-Shares slide on fear trade spat is now a tech cold war

(Adds U.S. market open, byline, dateline; previous LONDON)
* Dollar at two-year high, safe-haven yen also gains
* Government debt yields tumble on growth worries, trade
fears
* Oil extends losses, set for worst week in six months
* World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Herbert Lash
NEW YORK, May 23 (Reuters) - World shares skidded further on
Thursday as concerns grew that the China-U.S. trade conflict was
fast turning into a technology cold war between the world's two
largest economies, leading oil prices to plunge and
strengthening the dollar.
Worries over German manufacturing, the impact of the trade
war on Asian economies and deepening concerns over Brexit and
European parliamentary elections have curbed risk appetite and
sent investors scurrying to perceived safe-haven assets.
The dollar hit its highest level in two years against a
basket of six major currencies .DXY and the euro slumped to
levels last seen in May 2017 as a recovery in euro zone business
activity was weaker than expected.
Stocks tumbled on Wall Street and yields on the benchmark
10-year U.S. Treasury note fell to their lowest since December
2017 as IHS Markit data showed U.S. manufacturing growth in May
posted its weakest pace of activity in nearly a decade.
Equity investors, basking in the luxury of low interest
rates, had been hoping for the best since U.S.-China trade talks
soured, said Michael O'Rourke, chief market strategist at
JonesTrading in Greenwich, Connecticut.
As of Wednesday's close, the S&P 500 was just 3% off its
record closing high on April 30.
"You're seeing asset classes respond to the risk and they
have been for the couple of weeks," O'Rourke said. "Now that
it's become clear that the risks are out there, the (equity)
market has to price them in. There should be more downside."
MSCI's gauge of stocks across the globe .MIWD00000PUS shed
1.10% while the FTSEurofirst 300 index .FTEU3 of leading
European shares fell 1.18%.
On Wall Street, the Dow Jones Industrial Average .DJI fell
312.3 points, or 1.21%, to 25,464.31. The S&P 500 .SPX lost
32.48 points, or 1.14%, to 2,823.79 and the Nasdaq Composite
.IXIC dropped 102.01 points, or 1.32%, to 7,648.83.
Asian stocks fell overnight to a four-month low.
Investors worry that the U.S.-China trade dispute, which has
already hurt global growth and business investment, could see a
further escalation with no signs of a resolution as yet.
China fired a fresh salvo on Thursday, saying Washington
needed to "correct" its "wrong actions."
Japanese conglomerate Panasonic Corp 6752.T joined a
growing list of multinationals that have said they are
disengaging from Huawei, the largest telecom-gear maker and
second-largest seller of smartphones. It also came after Reuters reported on Wednesday the U.S.
administration was considering Huawei-like sanctions on Chinese
video surveillance firm Hikvision 002415.SZ over the country's
treatment of its Uighur Muslim minority.
The U.S. military also said it had sent two Navy ships
through the Taiwan Strait. "It's tin hats on and battening down the hatches for a fair
bit of volatility for the next few months," said Tony Cousins,
chief executive of Pyrford International, the global equities
arm of BMO Global Asset Management.
One of the few markets to escape the turmoil was India. Its
main stocks market .BSESN touched an all-time high after
Prime Minister Narendra Modi's party scored a historic election
victory. Official data showing Modi's Bharatiya Janata Party
(BJP) ahead in 292 of the 542 seats available. The rupee also climbed but that, too, was an outlier.
Investors piled into the dollar as a relative safe haven
because of its importance in the global economy and the extra
cushion of the United States having some of the highest interest
rates in the developed world. The dollar hit a high of 98.371 against a basket of six
major currencies .DXY , its highest since May 2017, as it
headed for a fourth consecutive month of gains.
The euro EUR= was down 0.04% at $1.1148 after touching
$1.1109. The Japanese yen JPY= strengthened 0.52% versus the
greenback at 109.79 per dollar.
U.S. Treasury yields dropped across the board as risk
appetite diminished and Germany's 10-year bond yield fell
further into negative territory after a survey showed business
activity in the bloc was weaker than expected in May.
HS Markit's PMI, a guide to economic health, nudged up to
51.6 from a final April reading of 51.5, but was below market
expectations for 51.7. The benchmark 10-year U.S. Treasury note US10YT=RR rose
17/32 in price to push its yield down to 2.3344%.
Germany's 10-year government bond yield fell three basis
points to minus 0.114% DE10YT=RR .
Oil prices extended declines from the previous session as
trade tensions dampened the demand outlook and put the main
benchmarks on course for their biggest daily and weekly falls in
six months.
Brent crude futures LCOc1 , the international benchmark,
fell to a session low of $67.53 per barrel, and was trading down
$3.00 at $67.99.
U.S. West Texas Intermediate (WTI) crude futures CLc1 were
off by $3.47 at $57.95 per barrel. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
GRAPHIC-Asia stock markets https://tmsnrt.rs/2zpUAr4
GRAPHIC-Asia-Pacific valuations https://tmsnrt.rs/2Dr2BQA
GRAPHIC-Global assets in 2019 http://tmsnrt.rs/2jvdmXl
GRAPHIC-World FX rates in 2019 http://tmsnrt.rs/2egbfVh
GRAPHIC-MSCI All Country World Index Market Cap http://tmsnrt.rs/2EmTD6j
GRAPHIC-China trade shock interactive https://tmsnrt.rs/2SRopIf
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