* Equities fall on concerns over euro zone debt
* Fed's failure to signal stimulus adds to risk aversion
* Bond spreads tighter, CEE currencies seen vulnerable
By Seltem Iyigun
LONDON, Dec 14 (Reuters) - Emerging stocks extended
losses on Wednesday as concerns about the lack of a viable
long-term solution to Europe's debt problems hit global risk
appetite, and investors retreated from markets ahead of the
year-end.
Markets have been sliding since the start of the week as
investors settle on the view that measures agreed at last week's
EU summit did little to fan hopes of a resolution to the
two-year-old debt crisis.
The failure of the Federal Reserve on Tuesday to signal
renewed action to stimulate the economy also dampened global
risk sentiment.
"In general the year-end illiquidity is a major concern.
Also, investors remain wary of the euro zone debt crisis,
uncertain how it will evolve in the new year," said Di Luo,
emerging markets fixed income strategist at HSBC.
"To some extent no further easing from the Fed did play a
role, but I think Europe is more the key issue."
Also on Tuesday, Fitch revised the outlooks on the long-term
foreign and local currency ratings of Bulgaria, the Czech
Republic, Latvia and Lithuania to stable from positive due to
the deteriorating European economic and financial
outlook.
The MSCI emerging equities index hit its lowest in
two weeks and was more than 0.6 percent down by 1122 GMT, after
closing 0.9 percent down on Tuesday. The Thomson Reuters
emerging Europe index stood down 0.09 percent.
Emerging sovereign debt spreads narrowed by 4 basis
points to 367 bps over U.S. Treasuries.
Emerging European currencies generally traded stronger on
Wednesday with the Serbian dinar 2.1 percent stronger
versus the broadly weaker single euro while the Hungarian forint
firmed 0.5 percent.
But analysts said central European currencies would remain
vulnerable.
"Central and eastern Europe currencies will continue to
underperform relative to Latam and Asia. This (is) attributed to
the linkages with Western Europe on both the trade and funding
channels," wrote analysts at RBS.
Kenya's shilling extended gains against the dollar to
break through the 88 level for the first time since early June
after the central bank mopped up 4 billion shillings ($44.9
million) from the market through repurchase agreements.
(Editing by John Stonestreet)
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