EMERGING MARKETS: Assets mixed as US strikes dampen hopes of Iran peace deal

Stocks in emerging markets were mixed on Tuesday and currencies weakened, as investors assessed U.S. strikes on Iran a day after officials had raised market expectations of an imminent U.S.-Iran peace deal.

U.S. Secretary of State Marco Rubio said negotiating a deal with Iran could "take a few days," quashing hopes for a more rapid end to the conflict as U.S. forces conducted what Washington called defensive strikes in southern Iran.

Rubio had said on Monday the U.S. would pursue diplomacy before considering other options, and Iranian officials were engaged in talks with their Qatari counterparts for a deal.

"It's frustrating because U.S. officials are playing with markets and the narrative the way a cat plays with a mouse, and there is very little investors can do about it," said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.

On Tuesday, MSCI's index tracking global EM stocks .MSCIEF added 0.5% to hover near record highs, while the currencies gauge .MIEM00000CUS was flat.

TECH EUPHORIA STILL PROVIDES SOME SUPPORT

The stocks index hit a record earlier this month, buoyed by rallies in tech-heavy Asian bourses, but eased from the levels due to uncertainty surrounding the peace deal.

South Korea's KOSPI .KS11, however, continued to draw support from tech enthusiasm, gaining 2.6% to a record high. Other major regional bourses, including in India .NSEI and Taiwan .TWII, traded lower.

Investors have been worried about the health of Asian economies as they are heavily reliant on Middle East energy supplies.

These concerns have pushed Indonesia's rupiah IDR= to record lows against the dollar, while Sri Lanka's central bank stunned markets with an outsized 100 basis point increase to its policy rate, its biggest hike in three years.

In the Middle East, Turkish stocks .XU100 edged 1.3% lower and the currency TRYTOM=D3 fell 0.4%, set for its biggest intraday drop since July in a truncated trading session.

Assets last week were volatile after an unprecedented judicial crackdown on Turkey's main opposition party.

South Africa's rand ZAR= and local stocks .JTOPI fell 0.5% and 1.1%, respectively, partly tracking a dip in gold prices. Moody's revision of the gold-exporting country's outlook to 'positive' from 'stable' helped spark a rally on Monday.

Most currencies in emerging Europe were subdued against the euro. Hungary's forint EURHUF= weakened 0.5% ahead of a local central bank decision, where it was widely expected to hold rates steady.

Equities in Poland .WIG20 fell 0.2% and Romania .BETI were flat, while ones in Hungary .BUX were up 0.7%.

Elsewhere, Senegal's President Bassirou Diomaye Faye named an economist as prime minister on Monday, three days after dismissing the old government that had spoken against debt restructuring.

Senegal's hard currency government bonds plunged with the 2028 euro-denominated bond down some 5.6 cents on the euro - its second largest daily decline in nearly a decade. The dollar-denominated ones fell nearly 4 cents on the dollar.

-Avinash P and Purvi Agarwal/Reuters