* Hungary's Nov retail sales fall by 5.4%
* South African rand extend declines
* Stocks down 0.7%, FX off 0.1%
Jan 8 (Reuters) - Emerging market stocks opened the week on a glum note, hitting nearly two-week lows led by broader declines in China shares, while currencies were subdued as investors await U.S. inflation data later in the week for clues on the interest rate outlook.
The MSCI's gauge of emerging market stocks dropped 0.7% at 0923 GMT, while a basket of currencies slipped 0.1% against a steady U.S. dollar.
A batch of mixed U.S. economic data on Friday left investors with little clarity on the pace and timing of interest rate cuts.
Initially, a blockbuster jobs report drew some pessimism around early rate cut bets with the dollar and U.S. bond yields rallying, but both erased gains after the Institute for Supply Management's (ISM) survey data showed a slowdown in the world's largest economy's service sector in December.
"Despite the ISM services drop, lingering tightness in the jobs market may encourage Fed members to keep pushing back against a first quarter rate cut," ING economists said in a note.
Emerging market assets had a tepid start to the first week of 2024 on investor caution on rate cuts, after a strong end to 2023 and the latest economic data has been unable to alleviate the cautiousness. Market participants will keenly watch U.S. inflation data to assess the path for rate cuts.
Across broader equities, China shares led declines with the blue-chip index falling 1.3%, hitting a nearly five-year low.
Hong Kong shares slid nearly 2%, while Shanghai's Composite index dropped 1.4% amid weak confidence in China's economy and rising geopolitical tensions.
In Europe, the Hungarian forint slipped 0.1%, snapping a five-day winning streak, while domestic retail sales fell by 5.4% on an annual basis in November followed by a 6.5% drop in October.
The Czech Republic's crown edged up 0.2%, while domestic industrial output fell by a higher-than-expected 2.7% year-on-year in November compared to forecasts for a 1.5% drop.
Regional markets in central and eastern Europe are set for a busy week - with some major events including the Polish central bank's interest rate decision and inflation numbers due from the Czech Republic, Hungary and Romania.
Turkey's lira weakened to fresh lows of 29.8955, inching closer to the 30 per dollar mark, while Turkey's local bank index rose over 6%.
The South African rand fell 0.4%, extending declines, having lost 2% in the previous week.
The International Monetary Fund's executive board will meet on Jan. 17 to approve an agreement to grant Kenya immediate access to a $682.3 million funding tranche and boost its current lending programme by $938 million.
(Reporting by Siddarth S in Bengaluru; Editing by Sharon Singleton)
