* Huawei, U.S.-China trade dispute rattle markets
* European chipmakers fall sharply on supply chain concerns
* Australian, Indian shares rally on apparent election
results
* Oil bounce proves brief
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
(Adds details, updates prices)
By Tommy Wilkes
LONDON, May 20 (Reuters) - Stock markets weakened on Monday
as concerns mounted about an escalating fallout from a U.S.
crackdown on China's Huawei Technologies.
Investors already on edge about an escalating U.S.-China
trade dispute were further rattled after Beijing accused
Washington of harbouring "extravagant expectations" for a trade
deal, underlining the gulf between the two sides. Asian shares had managed to reverse some of last week's
losses on Monday after Washington said it would lift tariffs in
North America, and as investors cheered apparent wins by
Conservative incumbent parties in elections in Australia and
India.
But the mood did not carry over to Europe, where weak
corporate earnings added to the gloom.
The pan-European Euro STOXX 600 .STOXX extended earlier
losses and was down 1.06% by 1100 GMT - the index, down 3.5% in
May, is on track for its first monthly loss in 2019.
The German DAX .GDAXI slid 1.38%, while France's CAC 40
.FCHI weakened 1.39%.
U.S. President Donald Trump's government added Huawei to a
trade blacklist last week, imposing restrictions that will make
it difficult to do business with U.S. companies. The repercussions quickly became evident as Google GOOGL.O
suspended some business with Huawei. In Europe, chipmakers Infineon Technologies IFXGn.DE , AMS
AMS.S and STMicroelectronics STM.PA dropped sharply, falling
between 6% and 12% on growing fears of a disruption to the
industry's global supply chain. "Market volatility continues to stem from announcements and
interpretations of what is going on in trade disputes between
the U.S. and its trading partners, but principally China," said
Jasper Lawler, head of research at London Capital Group.
"China are unlikely to take Google's suspension of business
with Huawei lying down."
On the positive side, a U.S. decision on Friday to remove
tariffs on Canadian steel and aluminium prompted Canada's
foreign minister to vow the quick ratification of a new North
American trade agreement.
The MSCI index of world shares .MIWD00000PUS , which tracks
shares in 47 countries, slipped 0.14%, leaving it 3.9% below its
2019 highs. The sudden return of trade war jitters has sent the
stock market's year-to-date rally into reverse.
U.S. S&P 500 e-mini futures ESc1 dropped 0.51%.
Prominent investor Jim Rogers, who co-founded the Quantum
Fund with George Soros, told the Reuters Global Markets Forum
that he believed Washington and Beijing would soon announce a
trade deal, although the current spat would not be the last time
Trump tried to exploit the prospect of a trade war.
"These are negotiating tactics from Mr. Trump at the moment.
What will happen is we will have some good news, the market will
have a rally. It will probably be the last rally," he said.
AUSSIE JUMPS
Oil prices briefly rallied after Saudi Energy Minister
Khalid al-Falih said that there was consensus among OPEC and
allied oil producers to reduce inventories "gently".
Rising tensions in the Middle East have also supported oil
prices in recent days. Trump on Sunday tweeted that a conflict
with Tehran would be the "official end" of Iran. Both U.S. crude CLc1 and Brent crude LCOc1 jumped more
than 1%, before giving up most of those gains as broader risk
sentiment soured. O/R
U.S. West Texas Intermediate crude traded at $62.75 a barrel
by 1030 GMT after earlier trading above $63. Brent crude was at
$72.30 per barrel.
In currency markets, the Australian dollar jumped nearly
1% AUD=D3 to $0.6890 after the centre-right Liberal National
Coalition pulled off a shock win in a federal election, beating
the centre-left Labor party. The Indian rupee also rallied INR= , gaining more than 1%
to 69.36 rupees per dollar after exit polls pointed to a
majority for Prime Minister Narendra Modi's Bharatiya Janata
Party and allies.
China's offshore yuan CNH=D3 rebounded after touching its
weakest against the dollar since November on Friday. It last
traded up 0.1% at 6.944 per dollar.
China's central bank is expected to use foreign exchange
intervention and monetary policy tools to stop it weakening past
the psychologically important 7 yuan-per-dollar level in the
near term, sources told Reuters. The dollar was little changed against the euro at $1.1155
EUR=EBS .
Sterling recovered 0.2% to $1.2741 GBP=D3 after suffering
its biggest weekly loss since 2017 after an apparent collapse in
Brexit talks in London. German government bond yields DE10YT=RR edged higher. That
followed a fall towards new 2-1/2 year lows last week after
investors nervous about trade and a global economic slowdown
flocked to safe-haven debt.
The 10-year U.S. Treasury yield US10YT=RR was little
changed at 2.396%.
Austrian yields AT10YT=RR held firm after a scandal
prompted Chancellor Sebastian Kurz to pull the plug on his
coalition with the far right at the weekend, raising the chances
of a snap election.