GLOBAL ECONOMY-China manufacturing growth slows; eyes on Europe

* China, South Korea PMIs point to moderating growth

* India's PMI expands at fastest rate in 27 months

* PMI in euro zone, Germany, France seen steady

* U.S. seen expanding for 10 month but at slower pace

By Alan Wheatley and Yoo Choonsik

BEIJING/SEOUL, June 1 (Reuters) - Manufacturing growth in China and South Korea slowed down in May as the pace of new orders eased amid growing uncertainty over what damage Europe's debt crisis may do to Asia's export-dependent economies.

After cooling in March and April, Indian manufacturing in May hit its fastest pace in more than two years, reflecting steady growth in output, new orders and employment. Similarly, Japan's manufacturing sector grew in May at its fastest pace in almost four years after a slowdown in April, data showed on Monday.

The May global PMI surveys are being closely watched by investors because they could reveal how the government debt crisis in the euro zone is impacting the world economy.

Many Asian countries are still showing double-digit gains in exports over year earlier months despit the week's of financial market turmoil triggered by the debt crisis.

"But the key word here is 'yet' and there still must be some caution about the near-term strength of external demand," said Brian Jackson, senior emerging market strategist at Royal Bank of Canada in Hong Kong.

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Insider TV: HSBC Chief China economist on the economy

link.reuters.com/huz37k

Graphic on Asia PMIs: here

Graphic on China's PMIs:

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China's official purchasing managers' index (PMI) released on Tuesday fell in May to 53.9 from 55.7 in April, just below market expectations but still the 15th straight month above the threshold at 50 that separates expansion from contraction.

A companion index compiled by British research firm Markit for HSBC dropped to an 11-month low of 52.7 in May from a downwardly revised 55.2 in April. [ID:nTOE65001Z]

"Details suggest that overheating risks in China's economy have receded under external weaknesses and domestic tightening," Citigroup economists noted.

They expect the index to soften modestly, before a rebound later in the year and said the slowdown is consistent with seasonal patterns observed over five years.

LOSING ENERGY?

The slower growth suggested by the PMIs weighed on shares.

The MSCI index of Asia Pacific stocks outside Japan .MIAPJ0000PUS, which has been underperforming world equity markets this year, fell 1.4 percent. Shanghai stocks .SSEC ended the morning with a fall of just over 1 percent.

Since China has been such an engine of global growth as the world emerged from its deepest recession in decades, a sharp slowdown in China could deal a blow.

"The result indicates weakening of momentum in the manufacturing sector and confirms our expectation that GDP growth will slow sharply in Q2 and continue decelerating in Q3," Dariusz Kowalczyk, SJS Markets chief investment strategist in Hong Kong.

South Korea's May PMI hit a five-month low of 54.61 compared to 57.06 in April. The PMI coincided with official data showing that the country's exports in May jumped close to 42 percent over a year earlier and the average exports per working day hit a record $1.84 billion. [ID:nSUL000063] [ID:nTOE64U00S]

India's PMI, based on a survey of 500 firms, surged to a 27-month high of 59.0 from 57.2 in April. It is also the 14th month that the indicator has been above 50.

GDP figures on Monday showed that the economy expanded 8.6 percent in the March quarter, compared with a year earlier, the strongest pace in six months.

"The Indian economy is hardly pausing for breath," said HSBC economist Frederic Neumann. [ID:nBMA007677]

However, while the figures underline its economic strength, they could also point to price pressures later on. Inflation is already running at double digits.

In Japan, the Nomura/JMMA Japan Manufacturing Purchasing Managers Index rose to a seasonally adjusted 54.7 from 53.8 the previous month. [ID:nTKC005843]

Nomura economist Minoru Nogimori said high export orders suggested Japan's shipments will stay strong, particularly to Asia.

"Although there are concerns over financial market disruption triggered by government debt problems in Europe, we expect the export-led manufacturing recovery to continue."

EUROPE STILL STEADY

Russian manufacturing expanded for a fifth month in a row in May, although the pace of growth eased, a PMI report showed on Tuesday. [ID:nnSLAVGE65Q]

May PMI data for the 16-country euro zone due at 0758 GMT is expected to show manufacturing growth held steady in May. A similar trend will be reflected in data for both Germany and France, while across the channel, British output growth is expected to have slowed down.

In the United States, economists expect that May marked the tenth month of expansion for manufacturers, but at a slower pace than April, and a fifth month of growth for services industries.

The Institute for Supply Management manufacturing index is forecast to fall to 59.7 from 60.4 in April. While manufacturing has been growing steadily since August, services, which account for a far larger share of U.S. employment, has been slower to take off. [ID:nN27119274] (Writing by Jan Dahinten; Editing by Neil Fullick)