EMERGING MARKETS-Emerging stocks, FX feel heat from political tensions

LONDON, June 7 (Reuters) - Middle East tensions, Britain's election and Donald Trump's troubles combined to dampen investors' risk appetite on emerging markets on Wednesday, with currencies suffering and stocks edging lower for a second day.

The decision by several Arab states to cut diplomatic ties with Qatar, accusing it of supporting terrorism, made markets - especially in the region - uneasy

Adding to the frayed nerves were three key events scheduled for Thursday - Britain's general election, a European Central Bank policy meeting and testimony by former FBI director James Comey which could impact on U.S. President Donald Trump's economic agenda.

MSCI's emerging stock benchmark slipped 0.2 percent, with heavyweight South Korea falling 0.4 percent, while bourses elsewhere in Asia , Turkey and parts of emerging Europe also suffered losses.

"There are worries about the GCC (Gulf Cooperation Council) and Qatar and how that will play out ... It's a geopolitical oil story that creates a risk off sentiment," said Per Hammarlund at SEB.

"In the U.K., people are sitting on the sidelines and waiting to see how this will pan out - if you have an acrimonious Brexit that will hurt the Central and Eastern European countries, and it could hurt the EU too, so it has wider ramifications."

Markets in the Gulf remained under some pressure after U.S. President Donald Trump supported Saudi Arabia against Qatar.

Qatar's stock exchange fell 0.3 percent, having tumbled nearly 9 percent over the last two days. Doha's dollar-denominated debt edged lower across the curve, with some issues trading at their weakest in around 2-1/2 months.

Currencies fared little better, despite a steady dollar.

South Africa's rand had a soft start to the session after data showed on Tuesday that Africa's most industrialized nation slipped into recession for the first time in eight years.

The news raised the prospect of further credit rating downgrades and heaped pressure on President Jacob Zuma, who is already facing corruption allegations.

However, the rand recovered most of its losses to trade 0.2 percent weaker after central bank data showed FX reserves grew unexpectedly.

"The downgrade question is definitely one of the factors," said SEB's Hammarlund, referring to Moody's next assessment scheduled for release on Friday.

"But if you look at the rand and emerging markets in general over the longer term, you are still looking at a positive cycle - the worries about the rand will be short lived."

Russia's rouble and Mexico's peso also weakened against the dollar.

In Poland, central bank policy makers are scheduled to conclude their interest rate setting meeting, though analysts expect no change until the third quarter of 2018 given the benign outlook for inflation. Interest rates are at an all-time low of 1.5 percent.

For GRAPHIC on emerging market FX performance 2017, see http://tmsnrt.rs/2e7eoml For GRAPHIC on MSCI emerging index performance 2017, see http://tmsnrt.rs/2dZbdP5

For CENTRAL EUROPE market report, see

For TURKISH market report, see

For RUSSIAN market report, see) Emerging Markets Prices from Reuters

Equities Latest Net Chg % Chg % Chg

on year

Morgan Stanley

Emrg Mkt Indx 1014.76 -1.13 -0.11 +17.68 Czech Rep 1006.84 +0.88 +0.09 +9.25 Poland 2316.92 +13.24 +0.57 +18.94 Hungary 34991.11 +64.12 +0.18 +9.34 Romania 8671.26 -36.17 -0.42 +22.39 Greece 779.30 +1.77 +0.23 +21.08 Russia 1045.12 +3.89 +0.37 -9.30 South Africa 46053.85 +164.34 +0.36 +4.90 Turkey 98425.23 +93.69 +0.10 +25.96 China 3140.53 +38.40 +1.24 +1.19 India 31194.68 +4.12 +0.01 +17.16 Currencies Latest Prev Local Local close currency currency

% change % change

in 2017

Czech Rep 26.33 26.31 -0.08 +2.56

Poland 4.19 4.19 -0.03 +5.03

Hungary 308.49 307.82 -0.22 +0.11

Romania 4.56 4.56 -0.02 -0.65

Serbia 122.29 122.19 -0.08 +0.87

Russia 56.61 56.55 -0.12 +8.21

Kazakhstan 312.83 312.81 -0.01 +6.66

Ukraine 26.20 26.22 +0.08 +3.05

South Africa 12.81 12.82 +0.08 +7.18

Kenya 103.25 103.30 +0.05 -0.85

Israel 3.54 3.54 -0.06 +8.73

Turkey 3.52 3.51 -0.07 +0.28

China 6.79 6.79 +0.02 +2.21

India 64.39 64.42 +0.05 +5.53

Brazil 3.28 3.28 +0.00 -0.73

Mexico 18.23 18.23 -0.04 +13.61

Debt Index Strip Spd Chg %Rtn Index

Sov'gn Debt EMBIG 317 -1 .04 7 92.58 1

All data taken from Reuters at 08:57 GMT. Currency percent change calculated from the daily U.S. close at 2130 GMT. (Additional reporting by Claire Milhench; Editing by Tom Heneghan)