* Weak ZEW hits c.Europe; emerging stx flat
* Turkey subdued despite strong Q2 GDP
* Romanian leu up as c.bank steps in
By Sujata Rao
LONDON, Sept 14 (Reuters) - A fall in economic sentiment in
euro zone powerhouse Germany knocked eastern European stocks
down half a percent on Tuesday after four days of gains while
broader emerging stocks eased to trade just above flat.
The September ZEW survey of business sentiment fell to the
lowest since March 2009, signalling that Germany's recent
turbo-charged growth recovery may be flagging.
Stocks fell 0.5 percent by 1030 GMT in emerging Europe,
which relies heavily on Germany for exports and investment.
Czech <> and Polish <> stocks fell half a percent
But regional markets <.MIEE00000PUS> <.TRXFLDEEPU> are still
up 5 percent on the year and close to their highest since
end-April. Broader MSCI emerging stocks <.MSCIEF> were flat but
remain at 4-1/2 month highs and rose 2 percent on Monday, the
biggest one-day gain in over a month.
The weak ZEW comes as a blow after recent data in the United
States, China and other emerging economies as well as improved
forecasts for euro zone growth, appeared to hint that the world
economy may be in better shape than believed.
"We are in an up-and-down kind of environment and markets
trading from one piece of data to the next," said Agata
Urbanska, emerging markets strategist at ING in London. "It's
really too early to be very optimistic about the U.S. recovery."
She said that while the latest ZEW survey had knocked
central European assets, ING remains constructive on German
growth and the outlook for much of central Europe.
"As long as exports continue to grow, there is still support
for labour markets in the region," she added.
On currencies, the zloty and forint slipped a quarter
percent to the euro <EURPLN=> <EURHUF=> with the latter failing
to benefit from a T-bill auction which saw the Treasury place
more paper than expected at a lower yield than last week's sale.
Romania's leu jumped 0.7 percent to the euro <EURRON=>.
Five local dealers attributed the move to central bank action to
prop up the leu which had weakened to two-month lows last week.
MORE GOOD NEWS IN TURKEY
There was good news in Turkey, one of this year's top
emerging markets as forecast-beating data showed economic growth
of 10.3 percent in the second-quarter. That helped markets hold
gains made after a weekend referendum showed strong support for
the ruling AKP party ahead of next year's elections.
The Istanbul index <> inched to a new record high
before easing while the lira slipped 0.4 percent to the dollar
<TRY=> in line with weakness in other emerging currencies.
Analysts attributed the subdued market reaction to crowded
positioning as well as to expectations that interest rates will
not be raised off record lows for some time to come.
"A good figure that supports the momentum in Turkish
equities. The central bank must be happy with the recovery and
we don't see any particular inflationary pressure for the time...
We will obviously be raising our whole year forecast closer to
the 7 percent year-on-year mark from 6.1 percent, with risk even
to the upside," Chevreaux analysts said in a note.
The South African rand eased 0.4 percent but remained close
to 2-1/2 month highs <ZAR=>. The currency has risen more than 3
percent this month despite last week's rate cut to 30-year lows
as investors have piled into South African bonds.
On bond markets, Argentina outperformed following a ratings
upgrade to B on Monday, its portion of JP Morgan's EMBI Plus and
EMBI Global indices tightening 12 bps to U.S. Treasuries. Both
indices showed flat spreads over Treasuries <11EMJ> <11EML>.
Analysts say range trade is likely ahead of U.S. retail
sales data. But many appear hopeful on the global recovery.
Indian stocks for instance <> hit 32-month highs for
the third straight session. The rally is being led by tech
shares which are benefiting from hopes of an improving economic
scenario in the United States.
(Editing by Ron Askew)
