* MSCI EM stocks index testing 3-year highs
* Venezuela, PDVSA bonds fall across curve as tensions mount
* China data sends Shanghai bluechips to 19 month high
* Rouble, rand and lira slide as dollar steadies
By Marc Jones
LONDON, Aug 1 (Reuters) - Reassuring Chinese data and a weak dollar kept emerging market stocks near three-year highs on Tuesday, though Venezuelan bonds slid to their lowest in over a year as rising political tensions and sanctions by the United States fanned default fears.
MSCI’s emerging equity benchmark extended its near 25 percent rise this year, as Chinese blue chip stocks hit a 19-month high and stronger oil prices gave Russian shares their biggest gain in two weeks.
China’s manufacturing picked up pace in July, a private survey showed, as output and new orders rose at the fastest pace since February on strong export sales.
The Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) rose to 51.1 in July, above the 50-point mark that separates growth from contraction, and well above June’s 50.4 level that was also the forecast for the latest reading.
In central and eastern Europe there were also gains for Hungary, the Czech Republic and Romania’s bourses as their biggest export market, the euro zone, reported strong manufacturing purchasing managers’ figures too.
Polish stocks lagged, however, having jumped on Monday and as the prospect of legal action by the European Union against Warsaw for the government’s bid for powers to hire and fire top judges simmered in the background.
In bond markets, investors remained firmly focused on Venezuela after the United States slapped sanctions on President Nicolas Maduro following the controversial creation of an all-powerful legislative body.
The sovereign 2038 benchmark issue lost almost one cent for a second day running and bonds from state oil firm PDVSA fell across the curve again.
“Who knows what happens from here and whether it hastens Maduro’s exit,” said fund manager UBP’s EM macro and FX strategist Koon Chow.
“From a pure economics perspective the recovery rate on the bonds gets worse and worse the longer he stays.”
Under the new sanctions all of Maduro’s assets subject to U.S. jurisdiction are frozen, and Americans are barred from doing business with him. The White House branded Maduro a dictator for “seizing absolute power”.
Further domestic developments also unfolded. Venezuelan opposition leaders Leopoldo Lopez and Antonio Ledezma were taken from homes where they were under house arrest, the two leaders’ family members said on social media.
“12:27 in the morning: the moment when the dictatorship kidnaps Leopoldo at my house,” Lopez’s wife Lilian Tintori wrote on Twitter.
She included a link to a video of what appeared to be Lopez being led into a vehicle emblazoned with the word Sebin, Venezuela’s intelligence agency. Vanessa Ledezma posted a similar video of Ledezma.
The Chinese yuan had hit 10-month highs in both onshore and offshore trade overnight after the factory data and after a top central banker said the PBOC would continue to force financial firms to cut debt.
Indian shares ended largely flat as investors booked profits in lenders amid caution ahead of a widely-anticipated interest rate cut at the central bank’s policy meet on Wednesday.
Data had also showed that Indian factory activity plunged in July to its lowest since Feb. 2009, after Prime Minister Narendra Modi’s new tax policy severely hurt output and demand.
A number of the more free-floating big emerging market currencies also began to weaken as the dollar recovered from U.S. President Donald Trump latest upheaval as he fired his only recently-hired communications chief.
Russia’s rouble and South Africa’s rand were both down 0.4 percent at 60 per dollar and 13.22 per dollar respectively. Turkey’s lira was flat at 3.52 per dollar though the Mexican peso was up almost 0.3 percent at 17.75 per dollar.
For GRAPHIC on MSCI emerging index performance 2017, see tmsnrt.rs/2dZbdP5
For CENTRAL EUROPE market report, see
For TURKISH market report, see
For RUSSIAN market report, see) (Editing by Catherine Evans)