* Asia pares losses, European equities set to trade higher
* Trump: Huawei 'dangerous', could be included in China
trade deal
* Sterling steadies, Dollar off 2-year highs; some respite
for oil
* Asian stock markets: https://tmsnrt.rs/2zpUAr4
By Tomo Uetake and Noah Sin
TOKYO/HONG KONG, May 24 (Reuters) - Asian stock markets were
mixed on Friday, with sentiment torn between investors worried
that the U.S.-China trade war was becoming more protracted, and
others hopeful that the world's two largest economies would
reach a settlement soon.
European stock markets looked slightly more optimistic. In
early trade, futures for the pan-region Euro Stoxx 50 index
/STXEc1 and German DAX futures FDXc1 gained 0.4%, and
London's FTSE futures /FFIc1 were up 0.3%.
In Asia, MSCI's broadest index of Asia-Pacific shares
outside Japan .MIAPJ0000PUS bounced back to trade flat after
hitting a four-month low earlier. The index is still on track
for a third straight weekly loss, down 0.8% so far on the week.
Chinese equities firmed as some investors took advantage of
cheap share prices. The Shanghai Composite .SSEC gained 0.1%
and the blue-chip CSI 300 .CSI300 rose 0.4% in afternoon
trade. Hong Kong's Hang Seng .HSI added 0.3%. .SS
Japan's Nikkei average .N225 was lower by 0.3%.
On Wall Street, the Dow Jones Industrial Average .DJI fell
1.1%, the S&P 500 .SPX lost 1.2% and the Nasdaq Composite
.IXIC dropped 1.6%, as traders dumped cyclical names on fears
that the escalating U.S.-China trade war would stymie global
economic growth. .N
U.S. President Donald Trump said on Thursday that
Washington's complaints against Huawei Technologies HWT.UL
might be resolved within the framework of a U.S.-China trade
deal, while calling the Chinese telecom giant "very dangerous."
Jasper Lawler, head of research at London Capital Group,
said "the fact that Trump is still talking about a trade
agreement is offering some optimism to the markets."
"Traders have been focused on the damage to the global
economy that a prolonged trade war could cause, so a break from
the bad news is cautiously lifting sentiment," he wrote in a
note on Friday, commenting on the expected higher European open.
Washington last week effectively banned U.S. firms from
doing business with Huawei, the world's largest networking gear
maker, citing national security concerns.
The U.S. Commerce Department said on Thursday it was
proposing a new rule to impose anti-subsidy duties on products
from countries that undervalue their currencies, in another move
that could penalise Chinese products. China's Commerce Ministry hit back on Thursday, with its
spokesman saying "if the United States wants to continue trade
talks, they should show sincerity and correct their wrong
actions." Masanari Takada, cross-assets strategist at Nomura
Securities in Tokyo, said the U.S.-China trade conflict "has not
yet fully dented the global investor sentiment, so there is no
panic-selling. But at the same time, the sentiment will likely
remain weak."
As flight-to-safety plays dominated global markets, the
benchmark 10-year U.S. Treasury note US10YT=RR yield hit
2.292%, the lowest level since mid-October 2017, with the key
parts of the yield curve inverted. The yield last stood at
2.3237%.
Chotaro Morita, chief fixed income strategist at SMBC Nikko
Securities, said big falls shown in a fresh U.S. manufacturing
survey appear to reflect expectations of a breakdown in the
U.S-China trade talks.
"In the last couple of years, the PMI has had a very small
gap with hard data, such as industrial output. So if that holds
true this time, we could see factory production plunging into
negative levels (compared to a year ago)."
"Since the global financial crisis, U.S. output has fallen
only once: from 2015 to early 2016 when the shale industry was
badly hit. Markets could start to fret over a global slowdown as
they have done late last year."
The dollar index .DXY , which measures it against six
major currencies, hit a high of 98.371 on Thursday U.S. time. It
was last quoted at 97.847, little changed on the day.
The euro on Thursday slumped to levels last seen in May
2017 as a recovery in euro zone business activity was weaker
than expected. Early Friday, the currency was flat on the day at
$1.1181 EUR= .
Sterling weakened again on Thursday as pressure mounted on
British Prime Minister Theresa May to name a date for her
departure after a backlash over her last-ditch plans for
Britain's exit from the European Union. The pound was last traded at $1.2663 GBP=D4 , little
changed on the day. Sterling suffered its 14th consecutive day
of losses against the euro on Thursday, its longest losing
streak on record. It stood at 0.8829 pound to the euro
EURGBP= .
Other major currencies were relatively calm. The dollar was
holding at 109.59 yen JPY= , flat on the day.
In commodity markets, oil prices tumbled on Thursday as
trade tensions dampened the demand outlook, with the crude
benchmarks posting their biggest daily falls in six months. O/R
Oil prices stabilised on Friday amid OPEC supply cuts and
tensions in the Middle East.
U.S. crude CLc1 was last seen at $58.58 a barrel, up
1.16%, after Thursday's 5.7% fall that took it to the lowest in
two months. Brent crude LCOc1 futures rebounded 1.18% to
$68.56 per barrel, after falling 4.6% in the previous session.
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