* Emerging stocks down at three-week lows
* Turkish lira pressured; stocks stabilise
* Czech bonds rallies; Romanian leu firms
By Sebastian Tong
LONDON, Aug 12 (Reuters) - Gnawing doubts over the global
economic recovery continued to undermine emerging markets on
Thursday but prices stabilised around three-week lows after the
previous session's selloff.
Turkey's lira widened losses a day after the government's
decision to put fiscal reforms on hold while Czech moves to rein
in state spending bolstered demand for the country's bonds.
Euro zone industrial production in June fell short of market
expectations, deepening fears over the sustainability of the
global economic recovery. []
Sentiment in the Asian session had been hit by data showing
a slowdown in Chinese imports and output growth. []
Worries that the global recovery was stalling prompted the
U.S. Federal Reserve's pledge on Tuesday to maintain the current
level of monetary stimulus by using cash from maturing mortgage
bonds it holds to buy more government debt. []
"The continued commitment to stimulus should be good for risk
assets. But the market is focused very heavily on the prospects
of a double dip and on weaker demand," said Hong Kong-based Mark
Konyn, who oversees about $11 billion as Asia-Pacific chief
executive of RCM, a unit of Allianz Global Investors.
"Cash is still building up with several institutions and
there is a reluctance to allocate that cash -- the markets are
reflective of that," he added.
After a nearly 2 percent fall in the previous session,
emerging stocks <.MSCIEF> were down nearly 1 percent by 1025 GMT
to languish at three-week lows though emerging sovereign debt
<11EMJ> rallied to trade 4 basis points tighter over U.S.
Treasuries at 271 bps.
The Thomson Reuters Emerging European stock index
<.TRXFLDEEPU> retreated 0.7 percent.
Czech shares <> were down half a percentage point while
Polish shares <> were flat at three-week lows.
Down for their third session in a row, Russian shares
<> fell 1 percent while in fellow resource-exporter South
Africa, equities <.JTOPI> retreated for the seventh session.
Turkish shares <>, which had fallen more than 1.5
percent on Wednesday, steadied at their lowest levels in three
weeks.
TURKISH TRACK RECORD
Also at three-week lows was the country's lira, which dipped
0.5 percent against the dollar <TRY=>, still weighed by investor
uncertainty following Ankara's decision to delay the
implementation of fiscal reforms.
Moody's Investors became the third rating agency to warn
that the delay could adversely affect the country's credit
ratings and economic fundamentals. []
But some investors are more sanguine about the delay.
[]
"It is definitely a shame that the fiscal rule may be
watered down ... but ultimately it will be the government's
fiscal record that will be the main driver of sentiment. Since
2003, this government has held the best track record globally
and year-to-date budget performance has been one of the best
too," Cheuvreux EEMEA economist Simon Quijano-Evans said in a
note.
Most high-yielding currencies were weaker though the risk of
central bank intervention helped the Romanian leu to buck the
regional trend to firm against the euro <EURRON=>.
The Czech crown was mostly flat against the euro <EURCZK=>
while bonds rallied a day after the government approved a 2011
budget framework with reduced spending. []
Yields on the Czech benchmark 2019 bond <CZ1002471=> touched
a lifetime low.
Poland's zloty <EURPLN=>, which touched three-month highs
earlier in the week, widened losses after a nearly 1 percent
fall against the euro in the previous session while Russia's
rouble hit a three-week low against its euro-dollar basket.
(Additional reporting by Umesh Desai; Editing by Ruth
Pitchford)
