* Stocks extend gains, rise almost 3 pct to 2-wk high
* Factory data, euro zone woes dampen sentiment
* Hungary sells debt; yields drop across curve
By Sujata Rao
LONDON, Dec 1 - Emerging stocks jumped almost 3 percent on Thursday to two-week highs, continuing to benefit from the previous session's central bank action to ease funding strains but the mood was dampened by factory data that reinforced fears of a looming global economic recession.
Purchasing managers' indexes (PMI) almost everywhere showed a slowdown in manufacturing and exports. In China, the world's No.2 economy, factory activity shrank in November for the first time in nearly three years while Indian and Korean factory growth also slowed. Euro zone manufacturing contracted at its fastest pace in two years.
A debt sale in Spain saw yields jump to 14-year highs.
All this cast a pall on sentiment along with renewed worries for the euro as attention now starts to shift to a Dec.9 European Union meeting.
"It's almost 24 hours since the global central bank action which emerging markets liked but now everyone is waiting to see what happens with the euro zone," said Simon Quijano-Evans, chief EMEA economist at ING Bank. "It's clear that time is running out quickly and unless markets see concrete action at next week's summit...confidence will erode quickly."
"Slowly we are seeing consensus moving to a recession scenario. That is reflected in today's PMIs but that's what markets have been pricing already," he added.
By 1120 GMT the benchmark MSCI emerging equities index was up 2.9 percent, thanks mainly to Asia's big bourses which were catching up with Wednesday gains elsewhere. Shanghai, Mumbai, Taipei and Seoul rose 2-4 percent on the day.
In emerging Europe however the impact of weaker economic data and fresh focus on the euro's troubles pushed markets down 0.6 percent.
Markets had rallied strongly on Wednesday after the U.S. Federal Reserve, the European Central Bank and the central banks of Canada, Britain, Japan and Switzerland said they would lower the cost of existing dollar swap lines by 50 basis points from Dec. 5, and arrange bilateral swaps to provide liquidity for other currencies..
An additional fillip was provided by a Chinese move to ease policy via cuts in bank reserve ratios.
"It feels a little bit like the day after the party. People got back to the office today....Now it's, let's sit back down and see what's going to happen," said Guillaume Salomon, emerging markets strategist at Societe Generale.
Russia was the outlier in emerging Europe. Moscow shares which had rallied 5 percent on Wednesday for the biggest one day-rise since last May, added 0.5 percent.
The surge was supported by data that showed Russian manufacturing expanded at its fastest pace in six months, driven by a stronger rise in new business orders.
DISMAL CENTRAL EUROPE; HUNGARY SELLS DEBT
The picture was dismal in central Europe, a region heavily reliant on the euro zone for investment and exports and most vulnerable to deleveraging by Western European banks.
PMI readings were poor in Poland and the Czech Republic, falling below the mid-level of 50 dividing expansion from contraction. while Hungarian PMI fell to the lowest since August 2009.
The Polish zloty was flat against the euro while the Czech crown fell 0.2 percent . The forint which gained almost 2 percent on Wednesday action pulled back a quarter percent against the euro.
However Hungary's first bond sale since its ratings downgrade to junk passed successfully, enabling the Treasury to sell 18 billion forints in three-year bonds rather than 15 billion earlier planned.
Hungarian government bond yields fell 30 basis points along the curve, pushing them back below 9 percent.
However fears persist that unless Budapest lands an IMF deal, it will have trouble raising the 4 billion euros for refinancing debt next year while the forint's 9 percent fall has fuelled fears for the country's vast FX loan stock.
Analysts said a speech by central bank governor Andras Simor reinforced the view interest rates might have to go higher after a 50 bps rate rise earlier this week.
"It looks like the (National Bank) will at least match the market implied rate hikes (a sequence of 50bp hikes in the next couple of MPC meetings). Anything below that will probably suggest room for forint underpeformance," Citi analysts said.
In Egypt, stocks extended gains, rising 1.3 percent to a 10-day low after a smooth election on Monday though the currency slipped against the dollar to a fresh seven-year low as the country awaited results of the first free election in six decades.
Emerging sovereign bond yields contracted six bps to 365 bps over U.S. Treasuries, the tightest in over two week (Additional reporting by xxx)
* Factory data, euro zone woes dampen sentiment
* Hungary sells debt; yields drop across curve
By Sujata Rao
LONDON, Dec 1 - Emerging stocks jumped almost 3 percent on Thursday to two-week highs, continuing to benefit from the previous session's central bank action to ease funding strains but the mood was dampened by factory data that reinforced fears of a looming global economic recession.
Purchasing managers' indexes (PMI) almost everywhere showed a slowdown in manufacturing and exports. In China, the world's No.2 economy, factory activity shrank in November for the first time in nearly three years while Indian and Korean factory growth also slowed. Euro zone manufacturing contracted at its fastest pace in two years.
A debt sale in Spain saw yields jump to 14-year highs.
All this cast a pall on sentiment along with renewed worries for the euro as attention now starts to shift to a Dec.9 European Union meeting.
"It's almost 24 hours since the global central bank action which emerging markets liked but now everyone is waiting to see what happens with the euro zone," said Simon Quijano-Evans, chief EMEA economist at ING Bank. "It's clear that time is running out quickly and unless markets see concrete action at next week's summit...confidence will erode quickly."
"Slowly we are seeing consensus moving to a recession scenario. That is reflected in today's PMIs but that's what markets have been pricing already," he added.
By 1120 GMT the benchmark MSCI emerging equities index was up 2.9 percent, thanks mainly to Asia's big bourses which were catching up with Wednesday gains elsewhere. Shanghai, Mumbai, Taipei and Seoul rose 2-4 percent on the day.
In emerging Europe however the impact of weaker economic data and fresh focus on the euro's troubles pushed markets down 0.6 percent.
Markets had rallied strongly on Wednesday after the U.S. Federal Reserve, the European Central Bank and the central banks of Canada, Britain, Japan and Switzerland said they would lower the cost of existing dollar swap lines by 50 basis points from Dec. 5, and arrange bilateral swaps to provide liquidity for other currencies..
An additional fillip was provided by a Chinese move to ease policy via cuts in bank reserve ratios.
"It feels a little bit like the day after the party. People got back to the office today....Now it's, let's sit back down and see what's going to happen," said Guillaume Salomon, emerging markets strategist at Societe Generale.
Russia was the outlier in emerging Europe. Moscow shares which had rallied 5 percent on Wednesday for the biggest one day-rise since last May, added 0.5 percent.
The surge was supported by data that showed Russian manufacturing expanded at its fastest pace in six months, driven by a stronger rise in new business orders.
DISMAL CENTRAL EUROPE; HUNGARY SELLS DEBT
The picture was dismal in central Europe, a region heavily reliant on the euro zone for investment and exports and most vulnerable to deleveraging by Western European banks.
PMI readings were poor in Poland and the Czech Republic, falling below the mid-level of 50 dividing expansion from contraction. while Hungarian PMI fell to the lowest since August 2009.
The Polish zloty was flat against the euro while the Czech crown fell 0.2 percent . The forint which gained almost 2 percent on Wednesday action pulled back a quarter percent against the euro.
However Hungary's first bond sale since its ratings downgrade to junk passed successfully, enabling the Treasury to sell 18 billion forints in three-year bonds rather than 15 billion earlier planned.
Hungarian government bond yields fell 30 basis points along the curve, pushing them back below 9 percent.
However fears persist that unless Budapest lands an IMF deal, it will have trouble raising the 4 billion euros for refinancing debt next year while the forint's 9 percent fall has fuelled fears for the country's vast FX loan stock.
Analysts said a speech by central bank governor Andras Simor reinforced the view interest rates might have to go higher after a 50 bps rate rise earlier this week.
"It looks like the (National Bank) will at least match the market implied rate hikes (a sequence of 50bp hikes in the next couple of MPC meetings). Anything below that will probably suggest room for forint underpeformance," Citi analysts said.
In Egypt, stocks extended gains, rising 1.3 percent to a 10-day low after a smooth election on Monday though the currency slipped against the dollar to a fresh seven-year low as the country awaited results of the first free election in six decades.
Emerging sovereign bond yields contracted six bps to 365 bps over U.S. Treasuries, the tightest in over two week (Additional reporting by xxx)
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