EMERGING MARKETS-EM assets head for weekly gains as Fed cut hopes build; PCE in focus

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Stocks up 0.83%, currencies edge 0.1% higher

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Ukraine creditors balk at Kyiv offer

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European assets steady

By Niket Nishant

Dec 5 (Reuters) - Emerging market stocks and currencies were set for weekly gains on Friday as investors turned their focus to upcoming U.S. Personal Consumption Expenditures data amid expectations the Federal Reserve will cut interest rates next week.

MSCI's gauge of emerging market stocks was up 0.83%, while its currencies index was up 0.1%.

Geopolitical risks, including the war in Ukraine and the contentious election in Honduras, have kept investors on edge this week. However, they have tentatively added risk as U.S. inflation indicators support expectations of a Fed easing.

Softer U.S. rates tend to ease pressure on funding costs for emerging market companies, reduce the strength of the dollar and boost the appeal of regional currencies.

Valuations in emerging markets remain a central part of the investment case, especially for those looking for an alternative to the U.S. where AI optimism has fuelled massive stock rallies.

"Having likely seen the worst of the tariff noise; and with a combination of softer dollar, stronger core equities and lower oil prices, we see emerging markets' resilience as having more room to run," Deutsche Bank analysts wrote in a note.

EUROPE STEADY, UKRAINE TALKS DRAG ON

In Ukraine, dollar-denominated bonds were largely steady. A key group of creditors to the country said on Thursday it could not yet back Kyiv's proposal to swap $2.6 billion in GDP-linked warrants for bonds.

Ukraine has struggled to rework the complex and costly GDP-linked instruments, which mature in 2041 and were issued in 2015 to clinch a debt restructuring in the wake of Russia's annexation of Crimea.

Poland's equities index was flat. Central bank governor Adam Glapinski said policymakers would probably move to a wait-and-see mode for a while after lowering interest rates.

The Polish zloty was flat against the euro.

Hungarian stocks were also little changed, but the forint resumed its slide. The government sold treasury bills and bonds worth a total of 190 billion forints ($580 million) at an auction, more than double the amount that was originally on offer.

The Czech crown also extended declines versus the euro after the country's inflation unexpectedly eased close to the central bank's target.

Elsewhere, Indonesian equities reversed course after hitting a record high and were last down 0.1%. Philippine shares jumped 1.1% after inflation eased more than expected in November due to a decline in food prices. (Reporting by Niket Nishant in Bengaluru. Editing by Mark Potter)