By Wayne Cole
SYDNEY, May 17 (Reuters) - Asian shares were struggling to end a bleak week in the black on Friday as upbeat U.S. economic news and solid company earnings offered only a fleeting respite from the interminable Sino-U.S. trade dispute.
Shanghai stocks slipped amid the fallout from President Donald Trump's move to block China'sHuawei Technologies [RIC:RIC:HWT.UL] from buying vital American technology.
"It is hard to get too excited as the news flows in the trade front points to an escalation rather than an ease in tensions," said Rodrigo Catril, senior FX strategist at National Australia Bank.
"Many commentators are suggesting the decision on Huawei and other Chinese telecos effectively means the President has taken the 'nuclear option' and it has now moved towards a 'fully-fledged' tech war with China."
For now, Asian markets were just happy for a break.
Japan's Nikkei bounced 1.5%, while the main Australian index climbed 0.9% to an 11-year peak as higher commodity prices boosted miners. E-Mini futures for the S&P 500 edged up 0.1%.
The cheer had yet to spread to Shanghai blue chips , which slipped 1.3%, while the yuan eased toward the 6.9000 per dollar level.
MSCI's broadest index of Asia-Pacific shares outside Japan lost early gains to dip 0.1%. It was just above a 15-week trough but down 2% for the week.
Sentiment had been bolstered overnight by better U.S. economic news, with U.S. housing starts surprisingly strong and a welcome pickup in the Philadelphia Federal Reserve's manufacturing survey.
Upbeat results from Walmart burnished the outlook for retail spending, though the giant chain also warned that tariffs would raise prices for U.S. consumers.
As the earnings season winds down, of the 457 S&P 500 companies reporting about 75% have beaten profit expectations, according to Refinitiv data.
The Dow ended Thursday with gains of 0.84%, while the S&P 500 added 0.89% and the Nasdaq 0.97%.
DOLLAR IN DEMAND
The pullback in risk aversion lifted Treasury yields, particularly at the short end where two-year yields rose to 2.19 percent.
Bond prices might also have been pressured by a speech from influential Fed Governor Lael Brainard who said the central bank could encourage "opportunistic reflation" by allowing inflation to run above its 2% target for some years.
The rise in yields underpinned the U.S. dollar, which hit a two-week high against a basket of currencies at 96.882 before steadying at 97.831.
The dollar regained a little lost ground on the safe-haven yen to stand at 109.92 , while the euro eased to $1.1175 and was off 0.5% for the week so far.
Sterling was one of the worst performers as Britain's Prime Minister Theresa May battled to keep her Brexit deal, and her premiership, intact amid growing fears of a disorderly departure from the European Union. GBP/
The pound touched a three-month low of $1.2780 and was down a hefty 1.6% for the week so far.
Also under pressure was the Australian dollar, losing 1.5% for the week to $0.6895 as investors piled into bets that interest rates would be cut in June.
In commodity markets, spot gold dropped off to $1,285.57 per ounce as risk sentiment improved.
Oil futures firmed into a fourth session as rising tensions in the Middle East stoked fears of potential supply disruptions. O/R
U.S. crude was last up 50 cents at $63.37 a barrel, while Brent crude futures rose 44 cents to $73.06.
Asia stock markets