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Markets are pressured by “higher risk” perception (Thursday, May 23, 2019)

Asian shares carved out a four-month trough on Thursday amid worries the Sino-U.S. trade conflict was fast morphing into a technology cold war between the world's two largest economies. Late Wednesday, Reuters reported the U.S. administration was considering Huawei-like sanctions on Chinese video surveillance firm Hikvision over the country's treatment of its Uighur Muslim minority, according to a person briefed on the matter.

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  Yields on two-year Treasuries of 2.237% are also well below the current effective funds rate at 2.39%.

In currencies, constant trade friction saw the safe haven yen in demand again as the dollar dipped to 110.20 yen and away from the week's top of 110.67. The dollar fared better on the euro at $1.1151 and was steady on a basket of currencies at 98.111.

Sterling was the main mover, sliding to a four-month low at $1.2625 before steadying at $1.2651 in Asia. British Prime Minister Theresa May came 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 British media reported May could announce her departure date as early as Friday.

In commodity markets, spot gold edged up a touch to $1,274.10 per ounce. Oil prices added to losses suffered overnight after an unexpected build in U.S. crude inventories compounded investor worries about demand. U.S. crude was last down 44 cents at $60.98 a barrel, while Brent crude futures lost 45 cents to $70.54