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 labor 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 leveling 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 labor 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 <.N225> 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 <.SSEC> 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, after the S&P 500 and Dow Jones Industrial Average <.DJI> 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.

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,, and against the yen 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 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, bringing the week's losses so far to 5.7 percent.

(Editing by Kazunori Takada)

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