* 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: tmsnrt.rs/2zpUAr4
By Hideyuki Sano and Daniel Leussink
TOKYO, May 16 (Reuters) - Asian shares fell on Thursday after the United States hit Chinese telecoms giant Huawei with severe sanctions, threatening to further strain Sino-U.S. trade ties.
MSCI’s broadest index of Asia-Pacific shares outside Japan slid 0.2%, hovering not far off its lowest since late January.
Japan’s Nikkei dropped 0.6%, with banks hurt by weak earnings, while South Korean shares also lost 0.6% and Chinese blue chips were down 0.2%.
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.
Bucking the downtrend, Australian stocks held steady as weaker-than-expected local job data supported expectations for a central bank rate cute.
The U.S. Commerce Department said late on Wednesday it was adding Huawei Technologies Co Ltd 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 gaining 0.58% and the MSCI’s broadest gauge of world stocks bouncing back from a two-month low hit on Tuesday.
Also on Wednesday, less than a week after Washington slapped higher tariffs on $250 billion imports from China, U.S. Treasury Secretary Steven Mnuchin said he will likely travel to Beijing soon to continue trade negotiations with Chinese counterparts.
The positive trade developments overnight lifted risk sentiment that had been dampened earlier in the session by weak economic data.
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.
Weak data underpinned U.S. bond prices, pushing down yields further.
The 10-year U.S. Treasuries yield eased to 2.371% , 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% on Wednesday and last stood at 2.1616%.
Fed funds rate futures are fully pricing in a rate cut by the end of this year and more than a 50 percent 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 brushed 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 109.49.
The euro rose 0.1% to $1.1208.
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 rose 0.5% to $72.10 a barrel, while U.S. West Texas Intermediate (WTI) crude fetched $62.35, 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 down to $1,295.6 per ounce. (Editing by Shri Navaratnam & Kim Coghill)