EMERGING MARKETS-Turkish assets extend falls; emerging stocks off 7-1/2 month high

By Sujata Rao

LONDON, July 19 (Reuters) - Turkey's stocks and lira fell further on Tuesday and local bond yields rose as Friday's failed coup continued to pressure markets, while broader emerging stocks eased off 7-1/2 month highs.

A slight dollar rise, weakness in global stocks and a pullback in commodity prices weighed on global emerging assets, along with renewed weakness in China's yuan, which was reported to be supported near 5-1/2 year lows by state-run banks' dollar sales.

Turkey's stock market opened around 1 percent lower, then trimmed some of those losses to stand 0.4 percent down, . Monday's 7 percent fall was the biggest daily loss since the height of the 2013 "taper tantrum".

Shares (Berlin: DI6.BE - news) in tourism-reliant Turkish Airlines fell 0.6 percent after slumping 12 percent to four-year lows, though they could enjoy some relief as more countries lifted restrictions on Turkey flights. Airport (Shanghai: 600463.SS - news) operator TAV rose 1 percent after Monday's 17-percent fall.

"There are a number of 'black swans' still there, especially this week as the government is still trying to grapple with what happened over the weekend. This purge is still ongoing ... So we are still trading on this uncertainty on the domestic front," Societe Generale (Swiss: 519928.SW - news) strategist Roxana Hulea said.

Investors are also focusing on Turkey's credit rating, which hangs by a thread after Moody's, one of the two agencies that rank it investment grade, put it on watch for a downgrade.

That helped push local 10-year yields above 10 percent for the first time since May, up some 30 basis points since before Friday's coup attempt, though they later eased.

Five-year credit default swaps rose five basis points to 254 bps, a three-week high, Markit (NasdaqGS: MRKT - news) said.

The central bank is expected to cut overnight lending rates by 25 bps on Tuesday. ING Bank analysts wrote: "A rate cut may be modestly lira-supportive to the extent to which it may ease a potential further sell-off in Turkish government bonds."

SocGen (Paris: FR0000130809 - news) 's Hulea also predicts a 25 bps cut, having moderated her earlier 50 bps forecast.

"It's a compromise between signalling that things are gradually returning to normal, and actually paying attention to the fact that outflows are detrimental to Turkey. This is something the central bank needs to tread very carefully on," she added.

While broader emerging markets have seen little spillover from the Turkey events, MSCI (NYSE: MSCI - news) 's emerging equity index eased 0.2 percent, snapping an eight-day streak of gains and tracking falls on European bourses.

It was also hit by losses in Hong Kong and Korea while South African and Russian stocks fell around 1 percent , as oil and commodity prices eased.

Polish stocks lost half a percent a day after hitting three-week highs. The zloty retreated 0.3 percent against the euro from the two-week highs touched after Fitch ratings agency held off cutting the country's sovereign rating last week.

For GRAPHIC on emerging market FX performance 2016, see http://link.reuters.com/jus35t

For GRAPHIC on MSCI emerging index performance 2016, see http://link.reuters.com/weh36s

For GRAPHIC on MSCI emerging Europe performance 2016, see http://link.reuters.com/jun28s

For GRAPHIC on MSCI frontier index performance 2016, see http://link.reuters.com/zyh97s

For CENTRAL EUROPE market report, see

For TURKISH market report, see

For RUSSIAN market report, see ) Emerging Markets Prices from Reuters Equities Latest Net Chg % Chg % Chg

on year

Morgan Stanley (Xetra: 885836 - news) Emrg Mkt Indx 867.71 -2.42 -0.28 +9.26

Czech Rep 871.05 +0.79 +0.09 -8.92

Poland 1779.72 -8.40 -0.47 -4.27

Hungary 27107.41 +19.19 +0.07 +13.32

Romania 6626.84 +3.61 +0.05 -5.39

Greece 557.92 +2.66 +0.48 -11.63

Russia 958.01 -11.34 -1.17 +26.55

South Africa 45938.93 -492.51 -1.06 +0.31

Turkey 76645.27 -312.34 -0.41 +6.86

China 3036.20 -7.37 -0.24 -14.21

India 27676.92 -69.74 -0.25 +5.97

Currencies Latest Prev Local Local

close currency currency

% change % change

in 2016

Czech Rep 27.01 27.02 +0.04 -0.04

Poland 4.38 4.37 -0.30 -2.82

Hungary 314.64 314.45 -0.06 +0.00

Romania 4.47 4.47 -0.06 +1.12

Serbia 123.00 122.99 -0.01 -1.24

Russia 63.04 62.82 -0.35 +15.72

Kazakhstan 338.55 339.10 +0.16 +0.58

Ukraine 24.81 24.84 +0.10 -3.46

South Africa 14.32 14.23 -0.61 +7.99

Kenya 101.43 101.30 -0.13 +0.76

Israel 3.86 3.85 -0.17 +0.79

Turkey 2.98 2.98 -0.18 -2.20

China 6.69 6.70 +0.18 -2.95

India 67.15 67.13 -0.03 -1.42

Brazil 3.25 3.25 +0.01 +21.75

Mexico 18.47 18.37 -0.52 -7.04

Debt Index Strip Spd Chg %Rtn Index

Sov'gn Debt EMBIG 380 4 .00 7 56.31 1

All data taken from Reuters at #N/A The record could not be found GMT.

Currency percent change calculated from the daily U.S (Other OTC: UBGXF - news) .

close at 2130 GMT.

(Additional reporting by Claire Milhench; Editing by Andrew Heavens)