* MSCI Asia-Pacific index pulls back from 10-year peak
* Spreadbetters expect European stocks to open a touch lower
* China Q3 GDP growth slows slightly to 6.8 pct vs 6.9 pct in Q2
* Dollar rebounds modestly thanks to spike in Treasury yields
* Brent crude flags after climbing to 3-week high
By Shinichi Saoshiro
TOKYO, Oct 19 (Reuters) - Asian stocks shed early gains on Thursday, pulling back from decade highs, with Chinese equities leading the way lower after data showed growth in the world’s second largest economy slowed slightly in the third quarter.
The dollar halted its decline, supported by higher U.S. yields.
Spreadbetters expected Britain’s FTSE to open 0.1 percent lower, Germany’s DAX to start flat and France’s CAC to open down 0.1 percent.
Data on Thursday showed China’s economic growth cooled slightly to 6.8 percent in the third quarter from a year earlier, from the second quarter’s 6.9 percent, as widely predicted.
A modest loss of momentum had been expected as the government reins in the heated property market and cracks down on riskier lending.
Other data showed China’s industrial output rise a stronger-than-expected 6.6 percent in September, while retail sales also outperformed, though investment growth eased more than expected and property sales fell for the first time in over two years.
The Chinese yuan and stocks eased, with Shanghai falling 0.4 percent.
“The GDP reading could weigh negatively on both mainland stock and currency markets as traders may position for further weakness into year-end suspecting financial curbs will continue to have a negative impact on growth in China,” said Stephen Innes, head of Asia-Pacific trading at OANDA in Singapore.
Early in the day, MSCI’s broadest index of Asia-Pacific shares outside Japan rose towards a 10-year high scaled on Tuesday but it was last down 0.1 percent.
South Korea’s KOSPI, on a record breaking tear for the past week, touched a historical high before retreating 0.4 percent. Australian stocks also pared gains to stand little changed.
Japan’s Nikkei rose to a fresh 21-year high and was up 0.4 percent, poised for its 13th straight session of gains.
The Nikkei was buoyed after the Dow closed above 23,000 for the first time on Wednesday, driven by a jump in IBM after it hinted at a return to revenue growth.
Elsewhere, Germany’s DAX had risen to another record high overnight, thanks to a soggy euro.
“The surrounding environment continues to favour the broader risk asset markets, with global economies recovering gradually and inflation staying low,” said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management in Tokyo.
“Potential factors that could impact the markets in the short term are changes to the Federal Reserve’s leadership and China’s Communist Party conference.”
The term of current Fed Chair Janet Yellen’s expires in February and investors are keen to see who U.S. President Donald Trump will pick as her replacement. The White House said Trump will announce his decision in the “coming days”.
China’s twice-a-decade congress kicked off on Wednesday. The focus is on how much power President Xi Jinping can cement, and whether he will use the extra clout to push through with more extensive but potentially risky economic and financial market reforms.
The dollar index against a basket of six major currencies was steady at 93.340.
The index ended a four-session winning run overnight on lacklustre U.S. data but resumed its climb after the 10-year Treasury yield spiked 4 basis points with safe-haven bond prices falling on better investor risk appetite.
The dollar was little changed at 112.940 yen after climbing 0.6 percent overnight. The euro nudged up 0.15 percent to $1.1802.
The New Zealand dollar dropped 0.8 percent to $0.7095 on nervousness ahead of a of a much-awaited announcement on the new government following an inconclusive election last month.
In commodities, Brent crude oil futures dipped 0.1 percent to $58.11 a barrel.
Brent had risen to a three-week high of $58.54 a barrel on Wednesday on worries about tensions in Iraq and Iran, but lost steam after a surprising drop in U.S. refining rates and an unexpected build in fuel stocks signalled slower demand in the world’s top oil consumer. (Additional reporting by Reuters Asia bureaus; Editing by Kim Coghill and Richard Borsuk)