China manufacturing slows. Asian stocks fall.

Chinese manufacturing is still contracting, but HSBC flash PMI suggests that the sector is starting to stabilize. Shanghai, Hong Kong, Tokyo, and Australian exchanges all fall after weak Chinese manufacturing data. 

Asian shares extended losses on Thursday after data indicated little respite for Chinese manufacturers, suggesting growth in the world's second-largest economy slowed further in the third quarter.

The MSCI's broadest index of Asia-Pacific shares outside Japan extended losses to be down 0.7 percent on the day after the HSBC flash purchasing managers' index was released. It had been down 0.5 percent before the data.

Australian shares were down 0.5 percent and the Australian dollar slipped to $1.0432 from around $1.0456 before the data.

Hong Kong and Shanghai shares briefly extending losses after the PMI was published, although they picked up again. The indexes were down 0.5 percent and 1.06 percent respectively on the day, little changed from levels before the PMI was released.

The HSBC flash PMI ticked up to 47.8 in September from a nine-month low in August of 47.6. Since the index remained below 50, it indicated the sector was still contracting. An output index hit its lowest level in 10 months.

"This is a sign the slowdown in Chinese manufacturing activity is halting and stabilising," said Hirokazu Yuihama, a senior strategist at Daiwa Securities.

"Market reactions may suggest they want to see some sort of steps to support the economy from authorities, which are seen as slow to take action," he said.

The data underlined expectations that growth in the world's second-biggest economy probably eased for the seventh straight quarter in the third quarter. It reinforced concerns of softening demand from the world's top consumer of many raw materials, weighing on risk sentiment broadly.

The Nikkei stock average fell 0.7 percent after jumping to a 4-1/2 month high on Wednesday.

European shares gained on Wednesday after the Bank of Japan launched fresh stimulus to support its economy following last week's aggressive easing by the U.S. Federal Reserve, while U.S. stocks edged up on data showing sales of existing U.S. homes rose in August at their fastest rate in more than two years.

But investors have become wary of the uncertainty over whether highly indebted Spain will seek a financial bailout to ease its fiscal strains.

The euro fell 0.3 percent to $1.3016, nearing Wednesday's low of $1.29931, while the dollar slipped to 78.31 yen, backing up from a one-month high of 79.23 on Wednesday after the BOJ's stimulus measure.

Reflecting improved market sentiment after central bank measures to support economies, the CBOE Volatility index, a gauge of expected volatility in the Standard & Poor's 500 index, fell on Wednesday to levels close to a five-year low hit in mid-August.

Spain's reluctance to seek a bailout underpinned demand for safe-haven German Bunds.

Madrid will seek on Thursday to raise up to 4.5 billion euros in three-year and 10-year bonds, after completing smooth sales of bills earlier in the week.

"There are tentative signs of a loss of short-term momentum in the euro risk trade following concerted central bank activity... Investor optimism may be tempered in the short term by poor macro momentum and the potential for euro zone political volatility," said Barclays Capital analysts in a note.

U.S. crude inched down 0.2 percent to $91.76 a barrel while Brent inched up 0.1 percent to $108.034.

Data on Thursday showed Japan's exports fell for a third straight month in the year to August while manufacturing sentiment hit its lowest since February - more evidence that slackening global demand is taking its toll on the export- reliant economy.

Exports to China, the biggest destination for Japanese shipments, fell 9.9 percent in the year to August, while those to the United States, the No. 2 export market for Japan, rose 10.3 percent, the data showed.