Combine the warm milk, water, sugar, and yeast in a bowl and let it proof for 5 minutes until foamy.
Add the proofed yeast, butter, egg, salt, and 1 cup of the flour to the bowl of a stand mixer and mix using the paddle attachment until combined. Add another cup of flour and mix in until smooth.
Switch to the dough hook and knead in the remaining flour, about ½ cup at a time, until a smooth, soft dough forms. Knead for 5 minutes on medium speed, then transfer to a lightly oiled bowl. Cover with plastic wrap and let the dough rise in a warm spot for 1 to 1 ½ hours until doubled in size.
Punch down the dough and divide into 4 even pieces. Roll into balls.
On a lightly floured surface, roll out one ball of dough into a 10-inch circle. Transfer to a baking sheet lined with a piece of parchment paper.
Spread ¼ cup of the nutella on the dough, then repeat with the next ball of dough, carefully placing it on top of the first layer of dough and nutella. Spread it with another ¼ cup of the nutella. Repeat with the third ball of dough and remaining nutella. Roll out the final ball of dough and lay it on top.
Use a 3-inch cup, jar, or small bowl as a guide in the center of the stacked dough. Use a sharp knife or pizza cutter to slice lines through all four layers of dough in towards the guide, leaving a 3-inch circle of dough in the center. It's easiest to cut 4 lines on each side first, then another 4 lines between the first four, dividing the dough into 8 segments, then between each of those so you end up with 16 sections.
Working with 2 sections at a time, twist the dough away from each other TWICE, then pinch the ends together really, really well. If you don't really pinch them together well, the bread will start to untwist and spoil the effect as it bakes. Repeat to create an 8-pointed star or snowflake shape.
Preheat oven to 375 degrees F while the bread rests for 20 minutes. Don't let it rise too much longer than that or it will lose it's shape when baked.
Brush the dough with an egg wash made by whisking the egg with a tablespoon of water or milk. Bake for 25-28 minutes until golden brown on top. Let cool for 5-10 minutes, then dust with powdered sugar. Serve warm.