Asian markets were trading mixed on Thursday with stock indices in China and Australia holding steady while those in Japan and Hong Kong declined marginally. Markets in South Korea, Taiwan and Singapore have managed to register modest gains.

The MSCI Asia Pacific Index fell 0.1% to 111.86 as of 11:15 a.m. in Tokyo. It swung between gains and losses at least six times. It is down 13% from this year’s high struck on Feb. 29. The index fell 2.5% on May 18, the most since Nov. 10.

Japan’s Nikkei 225 Stock Average fell ~0.3% while Australia’s S&P/ASX 200 Index was flat. South Korea’s Kospi Index gained ~0.3%. Hong Kong’s Hang Seng Index dropped ~0.4%.

China’s Shanghai Composite Index was static. The Straits Times index in Singapore was up 0.2% while the Taiex in Taiwan rose 0.2%.

China's manufacturing activity contracted at a faster pace in May as conditions for exporters worsened during the month, the preliminary findings of a survey by HSBC showed.

The so-called "flash" reading of the manufacturing Purchasing Managers' Index (PMI) dropped to 48.7 in May from a final print of 49.3 in April, HSBC said. A measure below 50 indicates contraction while any reading above that figure implies expansion.

The flash reading is typically based on 85% to 90% of the total responses in the monthly survey.

Hongbin Qu, chief economist for China at HSBC, said that the soft data call for more aggressive policy easing, but added that Beijing has been and will further step up easing efforts to stabilize growth.

In Europe, concerns over the future of the continent's monetary union sent the euro sharply lower, while the dollar rose to its highest level in nearly two years.

European leaders met in Brussels amid growing concerns that Greece could exit the eurozone, and that it would have an adverse effect on other struggling euro area economies.

EU leaders stressed their desire to keep Greece in the eurozone but admitted to a lack of consensus on the contentious issue of euro bonds.

Speaking after an informal leaders' summit, both EU President Herman Van Rompuy and German Chancellor Angela Merkel said that the EU wanted to keep Greece within the euro, but the next government must stick to previous agreements on fiscal discipline.

"We will ensure that European structural funds and instruments are mobilized to bring Greece on a path towards growth and job creation," said Van Rompuy, according to reports.

Meanwhile, Merkel said that difference remained over the creation of euro bonds - bonds backed by Europe that would help lending terms for

financially weaker members.

Germany opposed the use of such bonds until the EU can achieve a closer fiscal union, while newly elected French President Francois Hollande supports the idea.

However, Merkel reportedly left the door open to special "project bonds" to help the eurozone's weakest economies.