Emerging Markets-Pakistan unrest, Kenya poll in focus

LONDON Dec 28 (Reuters) - Emerging equities fell on Friday alongside other global markets with investors watching Pakistan after the assassination of opposition leader Benazir Bhutto, and Kenya where election results were coming in.

Emerging currencies were mixed against a broadly weaker dollar, which was undermined by disappointing U.S. durable goods data that boosted hopes of further rate cuts.

Global emerging equities .MSCIEF fell 0.2 percent.

Pakistani markets were closed on Friday with the rupee currency PKR= little traded offshore and last quoted at a new three-year low of 61.30 per dollar.

The Indian rupee fell along with local equity markets on Friday on worries foreign investors would withdraw funds in the aftermath of the killing. It later recouped some losses to trade flat around INR=IN Thursday's close of 39.42/43.

"The Indian stock market and (rupee) may be impacted to some extent in the short term," said Calyon Asia Research in a note.

"We believe that a possible impact on India and the Indian rupee should be manageable. But there is risk that the Pakistan issue significantly pushes up risk aversion and adds to other worries in the global financial markets," the bank added.

Pakistan's five-year credit default swaps spiked to 520 points, some 120 bps wider since Bhutto's death as investors factored in unrest in the nuclear-armed state.

Globally, the assassination was seen undermining stockmarkets and the dollar and boosting safe havens such as gold, bonds and the Swiss franc.

Emerging sovereign debt spreads 11EMJ= were three basis points wider from the U.S. close over U.S. Treasuries, which themselves inched higher in early trade on Friday supported by the previous day's weak economic data and worries over financial firms' losses from credit market turmoil.

Most markets were reported very quiet during the holiday period between Christmas and New Year with the Romanian leu the biggest loser in Friday's thin trade. It fell 1.8 percent to a three-week low against the euro EURRON=

"Volumes are quite low and the unit seems to be mainly driven by import-related deals," a dealer in Bucharest said.

The Kenyan shilling KES= was unchanged at 63.50 per dollar, as President Mwai Kibaki has been reported by local media to be trailing his rival Raila Odinga in the race to lead east Africa's biggest economy.

Election officials said provisional results would be announced throughout Friday but that the process could stretch into Saturday. If Odinga wins, he will be the first person to oust a sitting Kenyan leader since independence.

"In terms of the economy, it is unlikely to change much regardless of who is in power," said Razia Khan, Africa economist at Standard Chartered. "Markets tend to favour incumbent candidates so there might be a slight sell-off if there is an opposition victory but local markets are closed this week and there will very much be a wait-and-see approach."

The country has no outstanding Eurobonds but is hoping to issue one next year while foreigners have been active in its local bond markets.

The Turkish lira and South African rand both gained against the weak dollar, with the latter at a two-week high thanks to a smaller-than-expected trade deficit and strong gold prices ZAR=.

(Editing by Stephen Nisbet)