* Emerging stocks fall 2 pct, underperform global peers
* Strong dollar, Chinese share sell-off fuel risk aversion
* Central, eastern European currencies slip
By Sebastian Tong
LONDON, May 17 (Reuters) - Emerging assets were in broad
retreat on Monday, unnerved by the U.S. dollar's renewed push to
14-month highs and a sell-off in Chinese markets.
Investor concern about the euro zone's most indebted
countries persisted meanwhile, keeping the currencies of east
and central European economies, which depend on west European
demand, on the backfoot.
The Shanghai bourse's <> 5 percent plunge had led wider
share losses in Asia, which is bracing for the impact of a
weaker euro on its key export sector.
The euro slumped to its lowest against the dollar <EUR=> in
four years as investors continued to dump the single currency,
while the continued strength of the dollar, which hit its
highest against a basket of currencies <.DXY> since March last
year, is undermining risk appetite.
The benchmark MSCI Emerging Markets Index <.MSCIEF> slipped
2 percent by 1030 GMT, underperforming the global stock index
<.MIWD00000PUS> which pared early losses to trade 0.7 percent
lower.
German Chancellor Angela Merkel said on Sunday that a $1
trillion EU rescue plan announced a week ago had only bought
time for the euro zone to tackle the yawning gap between its
weakest and strongest economies. []
Adding to existing sovereign debt fears over Greece, Spain
and Portugal were concerns that planned austerity measures in
the euro zone would spill out of the common currency area and
dampen global demand.
"Markets will remain volatile for the next few weeks. We do
not see them going from weakness to strength ... It's not an
environment where risk is totally decoupled from euro/dollar
fluctuations and funds are said to be repatriating back to
dollar assets," said Luis Costa, Director CEEMEA Strategy at
Citi Global Markets.
Romania, where Greek bank lending is particularly
concentrated, saw shares fall 4.7 percent <> to lead broader
regional equity losses.
BULGARIA CANCELS EUROBOND
Data released earlier in the day showed Romania's current
account deficit widening in the first quarter as a result of
lower remittances from workers abroad and its foreign direct
investment falling by half. []
The leu weakened for a third straight session against the
euro <EURRON=>.
Bulgaria, which is also seen exposed to Greek lending,
recorded negative foreign direct investment in the first quarter
and announced it was cancelling a plan to sell a Eurobond as
costs had risen to the Greek crisis.
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The Russian rouble was among the biggest currency losers,
sliding 0.7 percent against its euro/dollar basket <RUS=MCX> as
oil prices sagged at the prospect of lower global economic
growth. []
Russian shares <> fell 1.8 percent.
"No doubt, the commodity story is being hit in the short
term due to the spillover from the EU, and that means
principally Russia," Cheuvreux bank said in a client note.
Meanwhile, the cost of insuring Ukraine's sovereign debt
against default for five years rose 27 basis points from
Friday's close, among the day's worst sovereign performers.
Credit default swaps (CDS) for Ukraine debt jumped to 635
bps from Friday's 608 bps, according to CDS monitor Markit.
Ukrainian nationalists have threatened demonstrations in
response to Russian President Dmitry Medvedev's visit to Kiev
this week.
On Medvedev's agenda is a proposal that Kiev gives up
control of its cherished gas pipeline system to Russian energy
giant Gazprom. []
(Additional reporting by Claire Milhench; Editing by Susan
Fenton)
