LONDON, May 29 (Reuters) - The prospect of monetary easing by the European Central Bank next week boosted stocks and currencies in Europe's emerging markets on Thursday, driving Turkish stocks to seven-month highs and the zloty to its highest this year against the euro.
High-yielding emerging markets have risen on expectations the ECB will opt for negative interest rates. In addition, there is speculation about monetary stimulus in China and that the U.S. Federal Reserve will not raise rates any time soon.
"The global backdrop has turned very supportive because of expectations of further policy easing by the ECB and acknowledgement the Fed will move very slowly," Neil Shearing, head of emerging markets research at Capital Economics, said.
Turkish stocks hit seven-month highs also partly in response to speculation of further interest rate cuts by the country's central bank.
Prime Minister Tayyip Erdogan has been scathing about the central bank's 50 basis-point cut in its one-week repo rate last week, urging bigger cuts to keep economic growth up ahead of presidential elections in August in which he is expected to run.
The zloty rose to its highest this year against the euro , with a potential ECB rate cut likely to increase the interest rate differential in favour of the Polish currency.
The MSCI emerging equities index was steady below recent near-seven-month highs. Many Western European markets were shut for Ascension Day holidays.
Russian stocks rose 1 percent on hopes of a new round of diplomacy over Ukraine. Ukraine's president-elect Petro Poroshenko and Russian president Vladimir Putin are both attending a lunch with world leaders on June 6 to mark the 70th anniversary of the World War Two "D-Day" landings in Normandy.
Russian assets have recovered some of this year's earlier losses as investors are no longer positioning for an escalation of the Ukraine crisis.
Argentina's debt is expected to rise when Latin American markets open after the country reached an agreement on Thursday with the Paris Club of sovereign creditors over repaying overdue debts.
"It seems a good deal for Argentina, both in terms of the seemingly generous repayment profile and the fact that they seem to have reached an agreement much sooner than I expected," Stuart Culverhouse, chief economist at frontier markets broker Exotix, said.
A Paris Club deal will enable Argentina to issue debt in international capital markets, though the country is still in dispute with "hold-out" commercial bondholders who refused to accept Argentina's two debt restructuring offers after the country defaulted on $100 billion in 2002.
Egyptian stocks fell 1 percent, adding to losses of more than 2 percent on Wednesday, after Abdel Fattah al-Sisi won Egyptian presidential elections as expected, but on a lower than expected turnout of 44.4 percent.
For GRAPHIC on emerging market FX performance 2014, see link.reuters.com/jus35t
For GRAPHIC on MSCI emerging index performance 2014, see link.reuters.com/weh36s
For GRAPHIC on MSCI emerging Europe performance 2014, see link.reuters.com/jun28s
For GRAPHIC on MSCI frontier index performance 2014, see link.reuters.com/zyh97s
For CENTRAL EUROPE market report, see
For TURKISH market report, see
For RUSSIAN market report, see ) (Additional reporting by Sujata Rao. Editing by Jane Merriman)