EMERGING MARKETS-China PMI hits stocks, Ukraine steadies
* Chinese stocks fall after factory PMI hits 7-month low
* Ukrainian debt insurance costs highest since Dec 2009
* Nigerian central bank chief suspended
LONDON, Feb 20 (Reuters) - Weak manufacturing data from China knocked 1 percent from emerging stocks on Thursday, while Ukraine's debt insurance costs rose to their highest since December 2009 on escalating conflict in the capital.
Chinese stocks fell from two-month highs reached earlier on Thursday after a flash February purchasing managers' index hit a seven-month low of 48.3.
Worries about a slowdown in the Chinese economy have contributed to the sharp sell-off in emerging markets in recent months.
"Like the January flash PMI miss, we expect this one to trigger a bout of market turmoil before it burns itself out," said ING analysts in a client note.
Investors were also rattled by Nigerian President Goodluck Jonathan's decision to suspend Central Bank Governor Lamido Sanusi, an increasingly outspoken critic of the government's record on tackling rampant corruption.
The MSCI emerging equities index fell 1 percent and emerging sovereign debt spreads widened by 2 basis points to 373 bps over U.S. Treasuries.
Ukraine's five-year credit default swaps rose 48 basis points to 1,373 bps, according to Markit. At least 21 civilians were killed on Thursday in Kiev, shattering an overnight truce.
But Ukrainian dollar bonds steadied after sharp drops in the previous session on the violent conflict between President Viktor Yanukovich's government and anti-government protestors.
Three European Union foreign ministers flew out of Kiev on Thursday without seeing Yanukovich, but three others were meeting the president, diplomats said.
Ukraine's June 2014 dollar bond edged up 0.1 point to 93, according to Tradeweb, and the 2017 bond fell 0.1 point to 82.4, according to Reuters data.
Traders said prices were marked down, rather than sold off heavily, in the previous session. Some bonds are also thought to still be in the hands of large U.S. investors like Franklin Templeton, which held large chunks of several issues according to end-December filings.
Investors are watching the fall-out from Ukraine to neighbouring economies such as Poland and Russia.
The rouble approached the previous day's five-year lows against the dollar.
"The rouble has been caught by the EM currency sell-off," said Joseph Dayan, London-based managing director for Russian broker BCS Financial Group.
"Ukraine is another unfortunate factor weighing in."
Most emerging European and African currencies were steady to softer.
The Nigerian naira dropped more than 1 percent, moving further below its regular trading band, after the move against Sanusi, a favourite with international investors.
Sanusi, who was due to end his term in June, had been presenting evidence to parliament which he said showed the state oil company had failed to remit around $20 billion that it owed to federal government coffers.
Nigerian stocks fell 0.7 percent.
"Foreign investors are likely to be active sellers of Nigerian assets in coming days," said Samir Gadio, emerging market strategist at Standard Bank.
Sanusi said he would challenge the decision.
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