Asian stocks mostly steadied while the dollar eased on Thursday amid concerns over the global outlook after the Federal Reserve said the economic recovery was faltering.

European shares are expected to open firmer after two consecutive sessions of losses, with futures for the STOXX Europe 50, Germany's DAX and France's CAC 40 gaining as much as 0.7 percent.

In Asia, South Korean shares outperformed its regional peers and rose 0.8 percent while Australian miners gained after the ruling party chose a new leader, spurring hopes that the government would compromise on a controversial mining tax.

But other markets were mostly steady to weaker, with the MSCI index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> up just 0.2 percent.

It's not as if investor sentiment has worsened dramatically, but gains look limited as there's uncertainty about the outlook for the global economy, said Yutaka Miura, a senior technical analyst at Mizuho Securities.

Japan's Nikkei <.N225> ended flat as a key support level held.

The euro and sterling rose but investors remained reluctant to chase them higher as sings of fragile economic recovery tempered appetite for risky positions.

Oil prices steadied, stabilizing after two days of losses under the influence of modest gains in regional equities and dovish comments from the U.S. Federal Reserve.

STOCK RALLY FIZZLES

South Korea's KOSPI <.KS11> rose 0.8 percent as the government lifted its 2010 growth forecast to 5.8 percent from 5 percent and announced a gradual return of economic policy to pre-crisis settings.

Global miners BHP Billiton and Rio Tinto rose around 1.5 percent, encouraged by new Prime Minister Julia Gillard's comments seeking negotiations with the miners over the tax. Fortescue Metals Group rose 2.5 percent.

Asian stocks are on track to post their first quarterly decline in over a year as fears of the euro zone debt crisis derailing a global economic recovery prompted a sharp selloff in risky assets.

The MSCI index of Asia Pacific shares outside Japan is down 5.5 percent this quarter versus a 6.6 percent decline in the Standard & Poor's 500 Index <.SPX> over the same period.

The heightened volatility across financial markets in May spooked investors who have remained largely on the sidelines keeping stock exchange volumes lethargic.

Optimism over China's move to allow the yuan to be more flexible quickly dissipated after the move failed to ignite a sustained rally in risky assets as realization set in that any appreciation in the yuan would be slow at best.

Barring unexpected events, the markets' focus for the second half of the year looks set to be firmly on policy around exit strategies from the global financial crisis, Alastair Newton of Nomura said in a note.

(Additional reporting by Aiko Hayashi in Tokyo; Editing by Kazunori Takada)

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