* Profit-taking hits Asia shares after hefty Q2 gains
* MSCI Asia ex-Japan eyes biggest quarterly rise in 16 years
* Funds overweight stocks for 1st time since Dec '07 -survey
* JGB 10-yr yields fall further after spike
By Eric Burroughs
HONG KONG, June 18 (Reuters) - Asian stocks retreated on Thursday, with some investors booking profits after solid gains in the second quarter sparked by signs the global economy is starting to recover.
European shares were set for a higher start, with futures pointing to very slight gains.
Asian stocks outside Japan are up nearly 30 percent so far in the April-June quarter and poised for their biggest quarterly gain in 16 years, led by a surge in Hong Kong's Hang Seng and India's benchmark SENSEX index.
Analysts remain divided about whether consumer spending in major economies will kick in later this year and help fuel the pick up in growth.
But the renewed confidence among portfolio managers has emboldened them to scoop up shares battered by the crisis last year as hedge funds were forced to dump assets and the global economy skidded into its deepest recession in decades.
A monthly poll from Bank of America-Merrill Lynch showed global fund managers have moved to overweight stocks for the first time since December 2007, during the early stages of the crisis that began nearly two years ago.
The poll also found global growth expectations reaching their highest level in six years. But a peaking out of Chinese growth expectations suggested that outperformance of global emerging markets versus developed markets has come to a near-term end, the survey said.
Japan's Nikkei average shed 1.4 percent and has lost nearly 5 percent from an eight-month high struck last week. But for the April-June quarter, the first of Japan's business year, the Nikkei is still up 19 percent, which would be its largest quarterly rise since 1995.
"It seems like a pull-back phase. People who want to take profits are starting to appear," said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments in Tokyo.
The MSCI index of Asia-Pacific shares outside Japan dropped 1 percent. Around the region, the Taiwan Weighted index lost 0.8 percent and the Hang Seng was down 2 percent.
Asian markets fared worse than the 0.1 percent dip in the U.S. S&P 500 the previous day.
For the quarter, the MSCI index has jumped 29 percent, which would be its biggest quarterly rise since the October-December period in 1993.
"The global economy will continue to heal itself, albeit at a gradual pace. The current sell-off in risky assets is inconsistent with the gradually improving economic fundamentals," said Stephen Jen, managing director of macroeconomics and currencies at BlueGold Capital Management, a London-based hedge fund.
DOLLAR STEADIES
The dollar was little changed and continued to suffer from the rebound in riskier assets and commodity prices that has prompted market players to favour higher-yielding currencies tied to the global economy, such as the Australian dollar.
Doubts about the dollar's status as a reserve currency have also hurt the greenback.
But leaders from the major emerging economies of Brazil, Russia, India, China and South Africa refrained from mentioning the dollar's reserve role in the communique of their inaugural summit this week, even as Russia pushed the issue.
The dollar index, a gauge of its performance against six major currencies, was little changed at 80.228, struggling to recover from a seven-month low hit earlier in the month.
The euro edged up 0.2 percent to 1.3965, while the dollar gained slightly against the yen to 95.80 yen.
The dollar has also been hit by the sharp rebound in oil and commodity prices as investors bet stronger growth will spur demand for raw materials.
The U.S. currency's 90-day rolling correlations show that the jump in gold and oil prices is having more of a negative impact, but changes in short-term interest rates are exerting little influence.
Oil prices rose 21 cents a barrel to $71.24, buoyed by a surprisingly big drop in U.S. crude inventories and ongoing demand from China. Gold was little changed at $938.75 an ounce.
Government bonds edged up on the dip in most stock markets, extending a rebound from a sell-off sparked by the sharp slide in U.S. Treasuries earlier in the month on further signs of economic improvement and a flurry of mortgage portfolio hedging against higher rates.
Korean bond futures rose 27 ticks to 109.22, recovering from a seven-month low after a vice finance minister said the government and central bank agreed that there is no need to raise interest rates.
Ten-year Japanese government bond yields dipped half a basis point to 1.455 percent and are down 10.5 basis points from an eight-month peak struck earlier in the month on the slide in Treasuries and Nikkei rally. (Additional reporting by Masayuki Kitano in Tokyo; Editing by Kazunori Takada)