Hong Kong led most Asian markets lower Wednesday with tech firms in the firing line after China Telecom was banned from the United States, adding to already fraught tensions between the superpowers as concerns lingered about inflation.

A strong corporate earnings season has provided some much-needed support to investors in recent weeks as companies showed resilience in the face of supply snarls, surging commodity and wage costs, and spiking Covid cases.

But long-running friction between Washington and Beijing continues to cast a dark shadow over trading floors, with the two sides locked in a stand-off over a range of issues including Taiwan, national security, technology, trade and Hong Kong.

On Tuesday, the Federal Communications Commission cancelled the operating licence of China Telecom's US unit saying it "raised significant national security and law enforcement risks".

The move came after a clampdown by Donald Trump's White House on other giants including Huawei and China Mobile.

US-listed Chinese tech firms sank, and their stocks in Hong Kong also suffered hefty selling, pulling the Hang Seng Index more than one percent lower.

The Hang Seng Tech Index lost more than three percent, with Tencent, Alibaba, JD.com and XD Inc among those taking a hit in morning trade.

The move "seems to dampen previous hopes that the US-China relations may be turning for the better", said Jun Rong Yeap of IG Asia. It "has raised some doubts as to whether further escalation may bring back more US scrutiny on Chinese technology players".

The rest of Asia was also in the red as a forecast-beating jump in Australian core inflation added to broad fears about soaring global prices that are forcing central banks to remove the ultra-loose monetary policies put in place at the start of the pandemic.

- 'Downside risks remain' -

With some countries having already lifted interest rates, the United Kingdom is expected to follow suit before the year's end, while the US Federal Reserve will likely taper its bond-buying programme next month and hike borrowing costs in mid-2022.

Investors are hoping for clues about the European Central Bank's plans when it holds its latest meeting on Thursday.

Tokyo, Shanghai, Sydney, Seoul, Wellington, Taipei, Manila and Jakarta all dropped, though Singapore rose.

The losses came as traders brushed off another record close for the Dow and S&P 500 on Wall Street.

However, observers remained upbeat that the global recovery, while slowing, will continue to favour companies' bottom line.

"Downside risks to the economy remain but investors are opting to look beyond these as companies continue to give us plenty of reason to be optimistic about what lies ahead," said Craig Erlam of OANDA.

Such "enthusiasm may come and go, creating plenty of two-way action in the markets", he added.

Still, Citigroup warned profit growth could be near its peak.

Oil markets dipped but remained at multi-year highs on expectations about surging demand and concerns over supplies.

Investors are also keeping tabs on the crisis in China's property sector with a number of developers struggling to meet their debt obligations, while industry giant China Evergrande faces a new deadline at the end of the week to avoid a default.

Authorities called on the firm's tycoon boss Xu Jiayin to dip into his own pocket to ease the firm's financial problems, reports said.

However, with liabilities of more than $300 billion, and his net worth at less than $8 billion, it is unlikely that would make much of a difference.

- Key figures around 0230 GMT -

Tokyo - Nikkei 225: DOWN 0.6 percent at 28,946.61 (break)

Hong Kong - Hang Seng Index: DOWN 1.7 percent at 25,604.05

Shanghai - Composite: DOWN 1.1 percent at 3,558.91

Dollar/yen: DOWN at 114.08 from 114.14 yen at 2040 GMT

Pound/dollar: UP at $1.3770 from $1.3767

Euro/dollar: DOWN at $1.1599 from $1.1604

Euro/pound: DOWN at 84.24 pence from 84.26 pence

West Texas Intermediate: DOWN 0.8 percent at $83.98 per barrel

Brent North Sea crude: DOWN 0.7 percent at $85.76 per barrel

New York - Dow: UP less than 0.1 percent at 35,756.88 (close)

London - FTSE 100: UP 0.8 percent at 7,277.62 (close)

-- Bloomberg News contributed to this story --

dan/qan

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