By Sebastian Tong

LONDON, July 3 (Reuters) - Emerging assets drifted lower on

Friday in trade kept largely listless by a U.S. market holiday

and following Thursday's weak employment data from the world's

largest economy.

South Africa's rand fell over 1 percent against the dollar,

backing off from recent one-year highs, on softening commodity

prices and worries over weaker government revenues.

The benchmark emerging equities index eased 0.1

percent by 1050 GMT while sovereign debt spreads widened 1 basis

point to trade at 430 basis points over U.S. Treasuries.

Weaker oil prices dragged Russian shares down 1.5

percent while Czech stocks sank to five-week lows.

Profit-taking on emerging equities was further fuelled by

U.S. payrolls data on Thursday showing employers cutting far

more jobs than expected in June.

'The markets are not reacting too badly and it hasn't

translated into palpable falls. But commodities are weaker and

you can't separate emerging markets from oil,' said Paul

Hollingworth, head of emerging research at BB Securities.

Data from funds-tracker EPFR showed emerging market equity

funds absorbing $972 million in the final week of June, ending a

quarter when they took in a record $26.5 billion.

After those stellar gains, emerging markets are likely to

tread water pending further signals to affirm investors' hopes

that the global economy has found a floor.

'Spreads in the past nine months have come in from north of

800 bps to north of 400 bps ... (The U.S. jobs data) is a basic

reality check,' said Keiran Curtis, a fixed income fund manager

at Aviva Investors.

CURRENCY STRENGTH

Weaker commodity prices helped drag South Africa's rand 1.3

percent lower versus the dollar, retreating further from

the 11-month high of 7.62 it hit on Wednesday.

Finance Minister Pravin Gordhan's warning earlier this week

that state revenue collections had deteriorated also weighed,

heightening expectations that the government would be forced to

take a much larger tap of the bond market.

But pockets of strength remained in emerging currencies

after gains that pushed some of them to multi-month highs.

Central and eastern European currencies were mostly firmer

though Hungary's forint eased 0.2 percent after

reaching a seven-month high in the previous session.

Poland's zloty firmed after a central banker said the

country needed no further monetary easing this year.

The zloty firmed 0.4 percent versus the euro,

though it remained off six-week highs reached on Monday.

Growing prospects of an end to monetary policy easing also

helped the Czech crown resume its advance against the euro.

The crown, which had touched a seven-month high versus the

common currency on Thursday, firmed a touch after the

release of minutes from a central bank meeting on June 25,

showing a lone vote among board members for a quarter point cut.

'We think this relative strength is partly driven by the

ongoing unwind of previous bearish positions and improving forex

liquidity in the local markets as the massive liquidity

injection by the European Central Bank and Swiss National Bank

is finding its way to central and eastern European markets,'

UniCredit analyst Gyula Toth said in a research note.

(Additional reporting by Sujata Rao; Editing by Ruth

Pitchford)

Keywords: MARKETS EMERGING Emerging Markets Prices from Reuters Equities Latest Net Chg % Chg % Chg on year Morgan Stanley Emrg Mkt Indx 766.03 -0.11 -0.01 +35.09 Czech Rep 873.00 -13.50 -1.52 +1.72 Poland 1829.05 -11.99 -0.65 +2.20 Hungary 14891.63 -207.94 -1.38 +21.65 Israel 860.88 -10.66 -1.22 +31.46 Romania 3395.39 -38.48 -1.12 +17.04 Russia 945.99 -14.47 -1.51 +49.71 South Africa 20024.95 +94.21 +0.47 +2.99 Turkey 37047.61 +9.40 +0.03 +37.91 China 3088.37 +28.11 +0.92 +69.62 India 14913.05 +254.56 +1.74 +54.58 Currencies Latest Prev Local Local close currency currency % change % change in 2009 Czech Rep 25.87 25.89 +0.08 +3.43 Poland 4.36 4.38 +0.52 -5.59 Hungary 271.62 271.18 -0.16 -2.97 Romania 4.20 4.21 +0.06 -4.50 Russia 36.90 36.86 -0.13 -5.70 Ukraine 7.61 7.61 +0.00 +2.50 South Africa 7.93 7.82 -1.38 +19.05 Kenya 75.70 75.80 +0.13 +3.17 Israel 3.88 3.87 -0.18 -2.63 Turkey 1.53 1.54 +0.11 +0.42 Brazil 1.95 1.95 +0.00 +18.51 Mexico 13.27 13.21 -0.46 +2.86 Debt Index Strip Spd Chg %Rtn Index Sov'gn Debt EMBI+ 430 1 -0.02 441.35 All data taken from Reuters at 1122 GMT. Currency percent change calculated from the daily U.S. close at 2130 GMT. For related news and prices, click on the codes in brackets: All emerging market news Local market reports Central and eastern Europe Romania Turkey Czech Republic South Africa Spot FX rates Eastern Europe spot FX Middle East spot FX Asia spot FX Latin America spot FX Other news and reports World central bank news Economic Data Guide Official rates Emerging Diary Top events Diaries Diaries Index

(sebastian.tong@thomsonreuters.com; +44 20 7542 8561; Reuters Messaging: sebastian.tong.reuters.com@reuters.net)

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