By Sujata Rao
LONDON (Reuters) - Emerging market assets posted modest gains on Tuesday after data reinforced evidence of economic recovery in most parts of the world but in India, Indonesia and Turkey currencies and stocks lost more ground.
While markets were rattled by reports of missile launches in the eastern Mediterranean, purchasing managers' surveys for August have underlined growth prospects for the global economy. Stronger Chinese services activity added to robust manufacturing data released earlier this week.
This is broadly supporting emerging markets despite simmering geo-political tensions and expectations the the U.S. Federal Reserve will start reducing its stimulus following a September 17-18 meeting, leaving the emerging stocks index (.MSCIEF) down just under 0.1 percent.
"The market is caught between global uncertainty and some local factors," said Murat Toprak, emerging markets strategist at HSBC in London.
"The market remains volatile, people have light positions because we are heading towards some important events," he added. This Friday's U.S. jobs data release which could determine the timing and scope of the Fed's stimulus rollback.
Export-reliant Asian currencies such as the won and the Taiwan dollar rose to four- and three-month highs to the dollar, though central European currencies such as the zloty and forint pulled back versus the euro after gains fuelled by robust PMI data locally and in the euro zone.
The Turkish lira fell 1.5 percent as data showed evidence of inflation pass-through from the weak lira and high oil prices. The reports of missile launches weighed on local markets and also pushed Israel's shekel down 0.4 percent.
Investors are also disappointed with the stance of the central bank which is applying only sporadic policy tightening to support the lira and has ruled out a big interest rate rise.
"While the central bank had in previous occasions given the impression that it might defend the lira with all available tools, communication and monetary policy tools have shifted several times," said Bernd Berg, a currency strategist at Credit Suisse Private Bank in Zurich.
"This leaves us with more uncertainty regarding ... the willingness of the central bank to stabilise the lira at all costs, should regional tensions and capital flight intensify."
The rupee fell towards last week's record low as weaker-than-expected factory data confirmed a sharp growth slowdown and Standard & Poor's hinted at the possibility of a ratings downgrade.
Goldman Sachs, the latest investment bank to cut Indian forecasts, downgraded growth to 4 percent from 6 percent for the current financial year and predicted the rupee to weaken to 72 per dollar in six months.
The Indonesian rupiah, meanwhile, fell past 11,000 per dollar for the first time in more than four years after a record trade deficit.
Indonesian shares (.JKSE) however rose 1.5 percent on the prospect of better global growth and exports while Korean (.KS11), Taiwanese (.TWII) and Chinese (.SSEC) markets also rose. But Indian shares slumped 3.5 percent, their biggest one-day loss in over two weeks.
(Additional reporting by Carolyn Cohn; Editing by Ruth Pitchford)