* Trump:'Dangerous' Huawei could be included in China trade deal
* Wall St stocks slide, 10 year Treasury yield hits lowest in 17 months
* Dollar hits 2 year high, pound at 4-1/2 mth low; Oil plummets 5.7%MSCI Asia-ex JP -0.9% WTD, on track for 3rd straight losing week
* Asian stock markets: https://tmsnrt.rs/2zpUAr4
By Tomo Uetake
Tokyo, May 24 (Reuters) - Asian shares hobbled near four-month lows on Friday and crude oil plunged on worries the U.S.-China trade spat was developing into a more entrenched strategic dispute between the world's two largest economies, pushing investors to safe-haven assets.
MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS stood flat, hovering near its fresh four-month low marked on Thursday, and was on track for a third straight weekly loss, down 0.9% so far on the week.
Japan's Nikkei average .N225 dropped 0.6%.
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 at the same time calling the Chinese telecommunications giant "very dangerous." last week effectively banned U.S. firms from doing business with Huawei, the world's largest telecoms network gear maker, citing national security concerns.
As flight-to-safety plays dominated the 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.
Chotaro Morita, chief fixed income strategist at SMBC Nikko Securities said big falls in 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 greenback at one point hit its highest level in two years against a basket of six major currencies and the euro slumped to levels last seen in May 2017 as a recovery in euro zone business activity was weaker than expected.
The dollar hit a high of 98.371 against a basket of six major currencies .DXY overnight. The index was last quoted at 97.880, unchanged on the day. The euro fetched $1.1182 EUR= .
Sterling weakened again on Thursday as pressure mounted on British Prime Minister Theresa May to name a date for her departure after backlash over her last-ditch plans for Britain's exit from the European Union. was last traded at $1.2662 GBP=D4 , little changed on the day. The pound suffered its 14th consecutive day of losses against the euro on Thursday, its longest losing streak on record. It stood at 0.8830 pound to the euro EURGBP= .
Other major currencies were relatively calm, with the safe-haven yen still supported but not aggressively so.
The dollar was holding at 109.68 yen JPY= , almost flat on the day.
In commodity markets, oil prices plunged on Thursday, with WTI crude losing nearly 6% as trade tensions dampened the demand outlook, putting the crude benchmarks on course for their biggest daily and weekly falls in six months. O/R
In early Asian trade, U.S. crude CLc1 rebounded 0.6% to $58.25 a barrel, after Thursday's 5.7% fall that too it to the lowest in two months. Brent crude LCOc1 futures also bounced back 0.4% to $68.05 per barrel, after falling 4.6% in the previous session.
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