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EM stocks up 0.7%, FX up flat

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Israel attacks Hamas leaders in Qatar, Trump 'very

unhappy'

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China's producer deflation eases

By Pranav Kashyap and Twesha Dikshit

Sept 10 (Reuters) - A gauge tracking emerging market

equities rose on Wednesday, with a Federal Reserve interest rate

cut all but sealed for this month, while Polish assets came

under pressure as Russia's war in Ukraine spilled into its

territory.

The zloty weakened 0.4% against the euro,

underperforming regional peers, while Warsaw's stocks fell 2%.

Poland said it had shot down Russian drones that entered its

airspace during an attack on western Ukraine - the first time a

NATO member has engaged militarily in the conflict.

Since Russia's invasion of Ukraine in 2022, drones have

periodically strayed into NATO territory, including Romania and

Poland, but had not previously been intercepted.

Ukraine's international bonds edged lower, while the Russian

rouble weakened to a more than five-month low.

"We're going to see more incidents like this partly because

it's war. Poland has a very strong lobby and the economy speaks

for itself and continues to do well and it's politically in a

good place, So it's in a very strong position," said Jonathan

Young, CEO of CEEMENA-focused investment firm Gryphon Holdings.

"You're obviously going to get this kind of short-term

reaction to what happened overnight but I wouldn't be reading

too much into it."

Meanwhile, an Israeli airstrike on Qatar that targeted Hamas

leaders rocked markets in the Middle East. Stocks in Doha

fell 0.4%, while Saudi Arabia's and Dubai's

indexes slipped more than 0.2% each.

Tel Aviv stocks, however, bucked the trend, hitting

a record high for a second straight session.

Emerging markets shook off a week of political churn in

countries including Turkey, Argentina, Thailand, Indonesia and

Nepal, as a looming Federal Reserve rate cut kept risk appetite

alive. The MSCI EM equity gauge was on track for a second

straight weekly gain, with CME's FedWatch tool showing a 25 bp

cut fully priced and odds of 50 bp creeping higher.

"A lot of EM countries don't have deep stock markets, but

they have big economies. If the Fed cuts and the dollar is weak,

there will then spillover effects into these stock markets, but

the longer-term view is what's the economy looking like," Young

added.

Hungary's central bank was due to publish August minutes on

Wednesday after holding rates steady for an 11th straight month,

with headline inflation still above its 2%-4% target band. The

high carry has kept the forint in favour, powering one of

central and eastern Europe's strongest year-to-date gains.

In Asia, Chinese stocks , were in

the green, tracking broader Asian markets, after data showed the

country's producer deflation eased in August as Beijing stepped

up efforts to curb price competition, while consumer prices fell

at their fastest rate in six months.

For TOP NEWS across emerging markets

For CENTRAL EUROPE market report, see

For TURKISH market report, see

For RUSSIAN market report, see