GLOBAL MARKETS-Shares skid on view trade spat morphing into tech cold war

* European shares follow Asia into the red
* Asia ex-Japan hits 4-month low, China shares drop
* Yen, sovereign bonds buoyed by safe-haven bid
* Pound tests $1.26 on worries PM May may make way for hard
Brexiteer
* Oil prices nurse losses as inventories build
* World FX rates in 2019 http://tmsnrt.rs/2egbfVh
* Asian stock markets: https://tmsnrt.rs/2zpUAr4

By Marc Jones
LONDON, May 23 (Reuters) - World shares skidded lower 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 and that Brexit was heading for another
unpredictable twist.
Asian stocks had caved to a four-month low as the trade
rhetoric rumbled, while dour German data a 3%
plunge in carmaker stocks and the sight of Italian banks sliding
back in a 'bear' market meant more damage for Europe.
0#.INDEXE
U.S. stock futures pointed to a weak start too with the S&P
500 e-minis ESc1 and Nasdaq futures faltering 0.8% and 1.2%
respectively.
Investors worry that the U.S.-China trade dispute, which has
already hurt global growth and business investment, could see a
further sharp 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 the
growing list of global companies which have said they are
disengaging from Huawei, the world's 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.
"We are as defensively positioned as we could be," he said,
adding it was impossible to predict what steps U.S. President
Donald Trump was likely to take next in the trade war with
China.
An increasing number of investors now seem to be hunkering
down for prolonged period of trade conflict.
Analysts at Nomura warned in a note that, "without a clear
way forward during an intensifying 2020 U.S. presidential
election, we see a rising risk that tariffs will remain in
effect through end 2020."
In response, Shanghai blue chips .CSI300 shed 1.7% to be
near their lowest since February. An index of major telecoms
firms .CSI000994 fell 3.7% as suppliers to Huawei suffered and
both MSCI's broadest Asia-Pacific ex Japan .MIAPJ0000PUS index
and Europe's carmakers .SXAP hit 3-4-month lows.
U.S. Treasury Secretary Steven Mnuchin had said on Wednesday
it would be at least a month before the United States would
enact proposed tariffs on $300 billion in Chinese imports as it
studies the impact on American consumers.
One of the few markets able to escape the drop was India.
Its main stocks market .BSESN touched an all-time high as
Prime Minister Narendra Modi's party scored a historic victory
in the nation's general election with official data showing
Modi's Bharatiya Janata Party (BJP) ahead in 292 of the 542
seats available. At least 272 seats are needed for a majority in the lower
house of parliament.
The rupee also climbed but that too was an outlier. Among
the major currencies, the constant trade friction saw the safe
haven yen in demand again as the dollar dipped to 110.16 yen
JPY= and away from the week's top of 110.67.
The dollar was up fractionally on the euro however EUR= at
$1.1130 which helped it touched a 1-month high on a basket of
currencies at 98.235 .DXY .
Minutes of the U.S. Federal Reserve's last meeting out on
Wednesday underlined its readiness to be patient on policy "for
some time" given the uncertain global outlook.
The chance of a rate cut seemed to diminish as many Fed
policy makers saw recent weakness in inflation as "transitory",
though the latest escalation in the trade war means markets are
still wagering on an eventual easing FEDWATCH .
Sterling had troubles of its own as it hit a 4-1/2-month low
of $1.2603 as it suffered its ninth drop in the last 10 days.
GBP=
British Prime Minister Theresa May was under intense
pressure after her latest Brexit gambit backfired and fuelled
calls for her to quit. Prominent Brexit supporter Andrea Leadsom resigned from the
government on Wednesday and with British media reporting May
could announce her departure date as early as Friday the bets on
a more hardline pro-Brexit replacing her are rising.
"Uncertainty is the only clear certainty in the near term,"
said Westpac macro strategist Tim Riddell.
"The risk of a hard-Brexit replacement for May has increased
the risks of a hard Brexit result or even a forced no-deal
exit," he added. "Such an event would likely force GBP lower,
increase risks of assets sliding and BOE (Bank of England)
taking counter action to support assets."
Benchmark government bonds all rallied amid the various
uncertainties and in commodity markets, spot gold was a bit
higher at $1,282 per ounce XAU= .
Oil prices added to losses suffered overnight though after
an unexpected build in U.S. crude inventories compounded
investor worries about demand. O/R
U.S. crude CLc1 was last down $1.26, or 2%, at $60.16 a
barrel, while Brent crude LCOc1 futures lost $1.56 to $69.45.

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