GLOBAL MARKETS-Asia shares slip as U.S. sanctions on Huawei threaten fresh tensions with China

* Asia stocks slip after U.S. unveils sanctions on Huawei
* Australian jobs data spurs rate cut expectations
* Soft U.S., China economic data underscore slowdown
* U.S. bond yields dip, 2-yr yields hits 15-month low
* Asian stock markets: https://tmsnrt.rs/2zpUAr4

By Hideyuki Sano and Daniel Leussink
TOKYO, May 16 (Reuters) - Asian shares struggled to find
their footing on Thursday as confidence was shaken after the
U.S. government hit Chinese telecoms giant Huawei with severe
sanctions, threatening to further strain Sino-U.S. trade ties.
European shares were set to open lower, with futures of the
pan-European STOXX 600 STXEc1 off a third of a percent and
those of Frankfurt's DAX FDXc1 down half a percent. E-mini
futures for the S&P 500 ESc1 were last 0.3% lower.
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS fell 0.25%, hovering not far off its lowest
since late January.
Japan's Nikkei .N225 lost 0.6%, while South Korean shares
lost 1.1% .KS11 .
Bucking the downtrend, Chinese shares recovered on hopes of
supportive government policy after opening in negative
territory, with the Shanghai Composite Index .SSEC last
trading up 0.5%. Australian stocks .AXJO advanced 0.5% as
weaker-than-expected local job data bolstered expectations for a
central bank rate cute.
Asian shares had steadied in early trade on news that U.S.
President Donald Trump was planning to delay tariffs on auto
imports, providing much needed relief to markets hit by a
flare-up in trade tensions and weak U.S. and Chinese economic
data. Late on Wednesday, the U.S. Commerce Department said it was
adding Huawei Technologies Co Ltd HWT.UL and 70 affiliates to
its "Entity List" - a move that bans the company from acquiring
components and technology from U.S. firms without government
approval. "There has been an increasing disconnect between Asian
markets and U.S. markets over the last six months," said Nick
Twidale, chief operating officer at Rakuten Securities Australia
in Sydney.
"U.S. markets were buoyed on President Trump possibly
pulling back on auto tariffs on both Europe and Japan, but
really Asian markets have latched on the fact that he's not
letting up in the trade war against China," he added.
On Wednesday, Wall Street shares extended a rebound, with
the S&P 500 .SPX gaining 0.58% and the MSCI's broadest gauge
of world stocks .MIWD00000PUS bouncing back from a two-month
low hit on Tuesday. .N
The gains came despite weak economic data out of both
Beijing and Washington. China reported surprisingly weaker
growth in retail sales and industrial output for April, with
overall retail sales posting the slowest increase since May
2003. In the United States, retail sales unexpectedly fell in
April as households cut back on purchases of motor vehicles and
a range of other goods, while industrial production fell 0.5% in
April, the third drop this year. PRICING IN A RATE CUT
Weak data underpinned U.S. bond prices, pushing down yields
further.
The 10-year U.S. Treasuries yield eased to 2.366%
US10YT=RR , near its 15-month low of 2.340% touched on March
28.
The two-year notes yield hit a 15-month low of 2.139%
US2YT=RR on Wednesday and last stood at 2.159%.
Fed funds rate futures 0#FF: are fully pricing in a rate
cut by the end of this year and more than a 50% chance of a move
by September.
"The markets are inching step by step in pricing in a rate
cut. That is a sea change from a year ago when the consensus was
three to four rate hikes a year," said Akira Takei, bond fund
manager at Asset Management One.
In the foreign exchange market, the Australian dollar
AUD=D4 touched its lowest since early January after a drop in
the country's full-time jobs supported views the central bank
may be forced to lower rates soon to stimulate the
economy. "Domestic data is starting to come off. We've got increased
global concerns as well," said Rakuten's Twidale.
"Expectations now will be rising that we are to get a cut in
June or in the (Reserve Bank of Australia's) meeting after
that."
Against the yen, the dollar dipped a tenth of a percent to
109.47 JPY= .
The euro tacked on 0.1% to $1.1209 EUR= .
Oil prices gained on the prospect of mounting tensions in
the Middle East hitting global supplies despite an unexpected
build in U.S. crude inventories.
Brent crude LCOc1 rose 0.5% to $72.11 a barrel, while U.S.
West Texas Intermediate (WTI) crude CLc1 fetched $62.34, also
half a percent higher.
The United States pulled staff from its embassy in Baghdad
on Wednesday out of apparent concern about perceived threats
from Iran. The sabotage of the tankers, for which no one has claimed
responsibility, and Saudi Arabia's announcement on Tuesday that
armed drones hit two of its oil pumping stations have raised
concerns Washington and Tehran may be inching toward conflict.
Gold edged up to $1,296.9 per ounce XAU= .

(Editing by Kim Coghill & Shri Navaratnam)