EMERGING MARKETS-EM assets edge higher with focus on US rate cut hopes, Ukraine peace deal

By Twesha Dikshit

Nov 25 (Reuters) - Most emerging market equities and currencies edged higher on Tuesday, helped by expectations of a potential U.S. interest rate cut in December, while Ukraine's international bonds benefited from renewed efforts toward peace talks.

The move comes at a time when jittery markets are eager to latch onto any catalyst to push higher, especially after the region's indexes suffered their worst week in months.

U.S. and Ukrainian officials said they had drafted a "refined peace framework" following talks in Geneva on Sunday, after agreeing to modify a U.S. proposal that Kyiv and its European allies saw as a Kremlin wish list.

Markets were positive about the development, with Ukraine's international bonds extending gains from the previous session. The zero-coupon 2035 bond was up 0.46 cents, bidding at 57.7 cents on the dollar.

Ukraine's President Volodymyr Zelenskiy could visit the U.S. in the next few days to finalise a deal that would end Ukraine's war with Russia, Kyiv's security chief said on Tuesday.

Meanwhile, Federal Reserve Governor Christopher Waller said on Monday the labour market was soft enough to justify a 25-basis-point rate lowering in December, adding to the upbeat sentiment.

His remarks followed New York Fed President John Williams on Friday, who also said interest rates were likely to decline "in the near term."

"The increased probability of a Fed rate cut next month helped to boost risk appetite. But this may not be sufficient to lift global equities to fresh all-time highs before the year-end," said David Morrison, senior market analyst at Trade Nation.

Investor are currently pricing in an 81% chance of a rate cut next month, up from last month's 40%, according to the CME FedWatch Tool.

MSCI's indexes tracking global emerging market stocks .MSCIEF gained 0.6%, while the currency gauge .MIEM00000CUS was up 0.1%. The indexes had logged their steepest weekly declines since April and July, respectively, amid a sharp global risk asset sell-off.

Romanian radar systems were no longer detecting signals of drones breaching national airspace, following detections of a drone signal earlier in the day. The benchmark stock index .BETI was up 0.7%.

Poland's WIG20 .WIG20 rose 0.6%, while Hungarian Budapest SE Index .BUX added 0.4%. Poland's retail sales posted a growth of 5.4% year-on-year for October, much higher than expectations.

Czech central bank's Vice-Governor Jan Frait said at a university debate that interest rate setting was adequate for the current state of the economy and outlook for the next two years.

The bank has kept its main repo rate at 3.5% since May. The Czech Koruna CZK= was up 0.2% against the dollar, while the benchmark index .PX added 0.3%.

In Asia, most emerging markets stocks were higher, with Taiwan and Thailand leading gains. Taiwan's benchmark .TWII gained 1.5% and Thailand equities .SETI rose 1.3%.

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