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.
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.