By Shinichi Saoshiro
TOKYO (Reuters) - Asian stocks stumbled on Thursday while the euro held near two-month highs against the dollar after surprisingly downbeat first quarter economic growth in the United States dimmed the mood.
The disappointing news on the world's biggest economy, coming on top of a worrying slowdown in China, found expression in a warning by New Zealand's central bank that it could cut rates if domestic momentum weakened.
MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.9 percent. Japan's Nikkei shed 1.9 percent and South Korean, Australian, Chinese and Hong Kong shares also suffered losses.
The drop in Asian equities followed Wednesday's slide in U.S and European stocks, with Germany's DAX - which hit a record high earlier this month - tumbling 3.2 percent on the euro's surge.
"Risk has been building in the markets for weeks - the mass account openings in China, the rally in Europe as the ECB ploughs on with its 65 billion euro a month QE program," said Evan Lucas, market strategist at IG in Melbourne.
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The U.S. economy grew just 0.2 percent in the first quarter, down sharply from the previous quarter's 2.2 percent growth. The disappointing data further dimmed already faint prospects for an interest rate hike in June by the Federal Reserve.
"If the U.S. was the main source of the slowdown in Asian export growth in the first quarter we should see growth start to accelerate," analysts at ING wrote.
Some economists also note that trade-reliant Asian economies are more sensitive now to growth trends in China than those in the U.S.
The euro was little changed at $1.1119 after surging to a near two-month high of $1.1188 in the wake of the data. A rise in euro zone debt yields also helped the euro. German Bund yields posted their biggest daily rise in two years overnight on waning deflation fears and improved prospects for a Greek debt deal. [GVD/EUR]
The common currency shed some of its gains after investors focused on the Fed's monetary policy statement attributing the winter slowdown in U.S. economic growth partly to transitory factors.
The Fed, however, took a dimmer view of the labour market after its two-day policy meeting ended late Wednesday.
"All in all, the FOMC statement gave a balanced assessment of the current economic slowdown and the Committee remains very much in a data-dependent mode. However, the balanced and cautious tone in the statement is a far cry from the optimism and (over)confidence that we have seen in previous statements," economists at Rabobank wrote in a note to clients.
The dollar was down 0.2 percent at 118.87 yen after a choppy session overnight which took it to between a low of 118.60 and a high of 119.36.
A rise in yields on U.S. Treasuries, which saw the benchmark 10-year note's yield climb to a six-week high overnight amid a global bond sell-off, helped shore up the dollar.
The New Zealand dollar sank 0.8 percent to $0.7618 after the Reserve Bank of New Zealand stood pat on monetary policy and said it would cut rates if warranted.
The kiwi's retreat pushed the Australian dollar down 0.3 percent to $0.7988 after it marched to a three-month peak of $0.8077 overnight on the dollar's broad weakness.
In commodities, U.S. crude extended gains after jumping to a four-month high overnight when the first crude stock draw in five months at the Cushing, Oklahoma, hub suggested the oil glut may be starting to wane. The contract was last up 0.1 percent at $58.65 a barrel
(Editing by Eric Meijer & Shri Navaratnam)