* Emerging equities <.MSCIEF> fall, led by China, Korea
* Russia stocks <> recover, rising 1.5 percent
* Geopolitical tensions extend to Turkey
* Hungarian forint <EURHUF=> falls on domestic politics
* Israeli shekel <ILS=> drops 1 pct, FX reserves jump
By Carolyn Cohn
LONDON, Sept 1 (Reuters) - Emerging equities fell 1.5
percent on Monday, pressured by oil prices, developed market
stocks and steep falls in China and South Korea, while
geopolitical jitters extended to Turkey.
Oil rose $1 a barrel as Hurricane Gustav shut U.S. Gulf
fields and developed European markets <> fell, led by
banks as Commerzbank <CBKG.DE> shares tumbled more than 7
percent after it agreed to buy Dresdner Kleinwort.
"People are still worried about the global economic picture
with conditions in the United States and Europe looking
particularly bad," said Nigel Rendell, emerging markets
strategist at Royal Bank of Canada.
"Central and eastern Europe have really been reassessed."
Eastern European markets are feeling the pressure of a euro
zone slowdown to the west and political concerns to the east.
The EU is holding an emergency summit on Russia on Monday
and EU leaders are set to issue a tough verbal condemnation of
Moscow over the conflict in the Georgian breakaway region of
South Ossetia.
However, oil boosted Russian stocks, which rose 1.5 percent
<>, and Commerzbank said it would use every chance to
expand in central and eastern Europe, either through organic or
external growth. []
CHINA, KOREA
Emerging equities were also dragged down by steep falls in
Chinese <> and Korean <> stocks.
Chinese shares slid 3 percent after corporate earnings for
the first half confirmed a trend of slowing earnings growth,
while Korean stocks plunged 4 percent on fears of capital flight
and a worsening balance of payments due to high commodity
prices.
Senior officials from South Korea's government, central bank
and financial regulatory authority will meet on Tuesday to
discuss turmoil in equity, currency and bond markets.
Emerging sovereign debt spreads steadied at 299 basis points
over U.S. Treasuries <11EMJ>, with markets subdued by the U.S.
Labour Day holiday on Monday.
TURKEY TROUBLE?
Turkey came under scrutiny after it said it would introduce
trade measures against Russia on Monday, in retaliation for
Russia's holding of thousands of Turkish trucks for inspection
at border customs posts [].
Russia has denounced as a "provocation" a U.S. and NATO
naval presence in the Black Sea, entry to which is via the
Turkish-controlled Bosphorus Strait.
Analysts at Unicredit recommended buying 6-month euro/lira
call options, in part "to take relatively cheap medium-term
bearish exposure to a country which is rapidly moving into the
geopolitical spotlight", they said in a client note.
The lira was trading close to 6-month lows against the euro
<EURTRY=>, though it was steady against the dollar <TRY=>.
Turkey's five-year credit default swaps, used to insure
against restructuring or default of debt, widened by around 2
basis points to 267-272 bps, a European bank trader said.
The Hungarian forint, meanwhile, fell against the euro
<EURHUF=> after weekend political wrangling raised the risk the
Socialists' minority government could collapse.
The Israeli shekel dropped 1 percent to a 4-1/2 month low
against the broadly stronger dollar <ILS=>, as Israel's foreign
currency reserves jumped in August.
The Bank of Israel said it bought $1.9 billion as part of
its plan to increase its foreign currency reserves over the next
two years.
(Additional reporting by Peter Apps; Editing by Ruth
Pitchford)
