* China slowdown adds to worries about global recovery
* HSBC's China manufacturing gauge at 14-mth low
* Nikkei down 2 pct, ex-Japan Asia stocks off 1.2 pct
* Swiss franc, yen gain as risk is reduced
* Asia equity valuations not compelling
By Kevin Plumberg
HONG KONG, July 1 (Reuters) - Asian stocks and commodities
fell while U.S. Treasury futures rose to a 14-month high on
Thursday, after manufacturing data showed China's rapid
economic growth was slowing, increasing fears of a global
double dip.
Major European stock markets were expected to open as much
as 2 percent lower, according to financial bookmakers,
following two reports that showed China's factories were
shifting down a notch.
While China's growth had been expected to cool from a
double-digit pace in the first quarter, the latest reports
combined with Europe's debt crisis and persistent weakness in
the U.S. housing and labour markets to spread a negative view
on the global recovery.
An official survey showed the pace of Chinese manufacturing
activity slowed in June to the lowest since February, while
HSBC's separate purchasing managers' index dropped to a
14-month low, with outright drops in output and new orders.
[] []
By contrast South Korea was booming, with June export
figures showing a record trade surplus, echoing uneven economic
reports from other regions in recent weeks that have prompted
investors to dump riskier assets. []
But all eyes were on China, which has largely led the
global recovery.
"China's economy growth is at a critical stage of levelling
off after the climb," said Zhang Liqun, a Chinese government
economist, said in a statement regarding an official
manufacturing survey.
Still, with Friday's June U.S. payrolls number expected to
show a shrinking labour market for the first time since
February, wary investors were shifting more money to havens
such as U.S. Treasuries and the yen.
Japan's Nikkei share average <> ended 2 percent lower
at a seven-month low. A mix of technology stocks and exporters
were the top drags on the index.
Chart analysts pointed to a few indicators that the market
was oversold but had little conviction in a rebound.
"The market appears to have more room to fall even though
some technical indicators are overstretched," said Yutaka
Miura, a senior technical analyst at Mizuho Securities in
Tokyo.
China's Shanghai composite <> drifted lower late in
the session, bringing losses on the day to 1 percent in
anticipation of a steady flood of new shares in the market.
Hong Kong's markets were closed for a public holiday.
Resource-related shares were under fire after the Chinese
data, though clawed back some after a newspaper report that
Australia's government was on the brink of a compromise with
mining companies over a controversial tax on the industry.
[]
The MSCI index of Asia Pacific stocks outside Japan fell
1.3 percent <.MIAPJ0000PUS>, after dropping nearly 10 percent
in the quarter that ended in June.
ASIA IS NOT CHEAP ENOUGH
Asian share valuations still do not appear compelling to
value-minded investors, especially with analysts cutting
corporate earnings forecasts because of expectations of weaker
growth.
The MSCI Asia ex-Japan index was trading at 12.1 times
12-month forward earnings expectations, only slightly lower
than the five-year average of 13.2, Thomson Reuters I/B/E/S
showed.
The three-month change in 12-month forward forecasts for
earnings in the region was 2 percent, the lowest in a year.
U.S. stock futures were down 0.4 percent <SPc1>, after the
S&P 500 <SPc1> and Dow Jones Industrial Average <> both
finished 1 percent lower overnight.
Broad weakness in stock markets pushed up U.S. Treasury
futures to the highest since April 2009, when the current
equity bull market began. The September future of the 10-year
note was up 0.2 percent <TYv1>.
In the foreign exchange market, the Swiss franc and yen
benefited from an increasing distaste for other riskier
currencies.
The euro remained under pressure, even though a three-month
funding tender in the euro zone on Wednesday did not reflect a
mad scramble by banks for cash, as some market watchers had
feared. []
The single currency hit a record low against the Swiss
franc, <EURCHF=R>, and against the yen <EURJPY=R> was closing
in on an 8-1/2-year low.
Spain, which is lumped into a group of indebted European
countries facing intense market scrutiny, will hold an auction
for 5-year bonds later on Thursday. Analysts were optimistic
about the sale, though Moody's warning over its top rating on
Spanish government debt overnight could be a damper.
[]
The Australian dollar was down 0.3 percent to US$0.8365,
having cut some losses on the day after the mining tax news.
Oil prices fell for a fourth consecutive day, down 0.9
percent to $74.90 a barrel <CLc1> on concerns about slowing
growth in China and a stronger U.S. dollar.
Three-month copper futures on the London Metal Exchange
were down 2 percent <CMCU3>, bringing the week's losses so far
to 5.7 percent.
(Editing by Kazunori Takada)
