* China manufacturing growth slows, India jumps in May
* Cyclical sectors weigh on equity indexes
* US Treasuries, gold do well as risk continues to be
slashed
By Kevin Plumberg
HONG KONG, June 1 (Reuters) - The euro and Asian stocks
slipped on Tuesday on creeping suspicion that a peak in the
recovery has passed and slowing growth in China and Europe in
the second half of the year will be obstacles to risky trades.
Major European stock futures were down 0.6 percent,
indicating a slightly lower open, with traders looking
cautiously at declines in Chinese manufacturing gauges and BP's
<BP.L> <BP.F> attempt to plug a disastrous oil leak in the Gulf
of Mexico failed.
After the most volatile month of trading since the wake of
Lehman Brothers' failure in the fall of 2008, investors now
focused on pricing in to what extent reduced demand from the
more fiscally austere euro zone would hit production in
economies like China and South Korea.
Dealers brushed aside stronger-than-expected May export
growth figures from Korea, which precede the rest of Asia, and
solid Australian retail sales, taking more interest in
forward-looking manufacturing indexes from China and India.
Indian factory activity was at a 27-month high in May, a
private sector index showed. [] However, growth in
China's factory output slowed and hiring eased in response to a
critical drop in new orders, an official survey showed.
[]
"The result indicates weakening of momentum in the
manufacturing sector and confirms our expectation that GDP
growth will slow sharply in Q2 and continue decelerating in
Q3," Dariusz Kowalczyk, chief investment strategist with SJS
Markets in Hong Kong, said in a note.
The Australian dollar <AUD=> held on to most of its losses
on the day after the Reserve Bank of Australia stood pat on
rates and said after a policy meeting they would remain
unchanged in the near term. The RBA said global growth would be
close to trend this year, although the euro sovereign debt
crisis meant continued weakness in Europe. []
The Canadian dollar was largely unchanged before an
expected rate rise from the Bank of Canada that would make it
the first G7 central bank to tighten policy after the financial
crisis.
CYCLICAL SECTORS UNDER FIRE
Declines in equity markets were modest, though cyclical
sectors such as technology and consumer discretionary appeared
more vulnerable to selling pressure.
Japan's Nikkei share average fell 0.6 percent <>, with
Fast Retailing <9983.T>, which owns the Uniqlo casual clothing
line, leading the index lower.
The Nikkei tumbled 11.7 percent in May, the largest monthly
drop since a 23.8 percent plunge in October 2008.
The MSCI index of Asia Pacific ex-Japan stocks
<.MIAPJ0000PUS>, which has been underperforming world equity
markets <.MIWD00000PUS> so far this year, fell 1.1 percent,
with the consumer discretionary sector the biggest drag.
U.S. stock futures were down 0.4 percent <SPc1> after a
long holiday weekend in the United States and Britain.
There were more than enough reasons to keep winding down
portfolio risk, especially after the European Central Bank
warned overnight of a "second wave" of writedowns at lenders of
up to 195 billion euros. []
The euro was down 0.2 percent to $1.2275 <EUR=>, about a
cent and a half away from a four-year low hit against the
dollar last month. The currency is down 14 percent so far this
year.
Traders were not in a mood to sell Treasuries or gold, with
risk reduction still the order of the day. The benchmark yield
on the U.S. 10-year note was at 3.30 percent <US10YT=RR>, down
around 50 basis points since the end of March when fears about
Europe's fiscal health picked up.
Gold climbed 0.4 percent to $1,218 an ounce <XAU=>, having
rebounded about $45 in the past week.
(Editing by Paul Tait)
