* Asian shares hobbled by U.S.-China technology battle
* Fed's Powell dismisses concerns about rising debt levels
* Chip-related shares under pressure
* Asian stock markets: https://tmsnrt.rs/2zpUAr4
By Hideyuki Sano
TOKYO, May 21 (Reuters) - Asian shares won some respite on Tuesday after Washington temporarily eased trade restrictions imposed last week on China's Huawei, although fears of a further escalation in tensions kept investors on edge.
MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was up 0.35% but stayed not far from a four-month low touched on Friday.
It has fallen almost 8% from a nine-month peak hit just over a month ago. Japan's Nikkei .N225 fell 0.4%.
The blue-chip CSI300 index .CSI300 rose 1.0%, a day after it fell to a three-month intraday low as Washington allowed Huawei Technologies Co Ltd HWT.UL to purchase American-made goods in order to maintain existing networks and provide software updates to existing Huawei handsets until Aug. 19. an increasingly acrimonious atmosphere between the world's two biggest economies have led investors to abandon any hopes of an early resolution, a sea change from just a few weeks ago when a deal was considered to be within reach.
"With the news around the U.S. and Huawei taking a turn for the worse, it seems that the trade war is increasingly showing signs of becoming a tech war," said Seema Shah, senior global investment Strategist at Principal Global Investors in London.
"The further this trend develops, the bigger the collateral damage will be – particularly in Asia and the U.S., but the ripple effect will be significant across the globe."
In New York, the S&P 500 .SPX lost 0.67% while the Nasdaq Composite .IXIC dropped 1.46%. The Philadelphia Semiconductor Index .SOX fell 4.02% to two-month lows.
Huawei suppliers took a hit, with Qualcomm QCOM.O falling 6.0% and Micron Technology MU.O 4.0%.
"The determination of the U.S. administration to paralyse China's aspirations to become a technology super power is clear when you consider that its actions against Huawei are not only damaging to China's technology sector, but also the U.S. tech sector," Shah said.
Some U.S. companies, such as Alphabet's GOOGL.O Google and Apple (NASDAQ:AAPL) Face ID parts supplier Lumentum Holdings Inc LITE.O , have already started to limit services to Huawei. Washington's Huawei ban, Beijing could take retaliatory measures against U.S. companies, further escalating tensions, said Norihiro Fujito, chief investment analyst at Mitsubishi UFJ Morgan Stanley (NYSE:MS) Securities.
Corporate earnings guidance provided to investors so far does not take into account the impact of the Huawei ban, said Nobuhiko Kuramochi, chief strategist at Mizuho Securities.
"The sales of semi-conductors will be curtailed at least in the short term and companies will likely need to revise down their earnings," he said.
Markets showed scant reaction to a speech by Federal Reserve Chairman Jerome Powell, who dismissed comparisons between the rise of business debt to record levels in recent years and the conditions in U.S. mortgage markets that preceded the 2007-to-2009 economic crisis. the foreign exchange market, major currencies were on the sidelines for now.
The euro was under pressure ahead of the European election this weekend but was little moved at $1.1165 EUR= , off Monday's low of $1.1150, its lowest level since May 3.
The dollar was little changed at 110.21 yen JPY= Monday's near two-week high of 110.32 yen.
The British pound was listless near four-month lows, trading at $1.2730 GBP=D4 , just a stone's throw from Friday's low of $1.2714, as embattled UK Prime Minister Theresa May struggled to pull together a Brexit deal.
The yuan firmed slightly to 6.9040 to the dollar CNY=CFXS in onshore trade, still not far from a 5-1/2-month low of 6.9188.
The Australian dollar AUD=D4 dipped 0.2% to $0.6891 after Australia's central bank governor said he would consider the case for lower interest rates at its June policy meeting. prices held near multi-week highs as OPEC indicated it was likely to maintain production cuts while escalating Middle East tensions provided further support.
Brent crude futures LCOc1 traded up 0.25% at $72.16 per barrel while U.S. crude futures CLc1 fetched $63.30 per barrel, up 0.3 percent.