Oct 19 (Reuters) – Sentiment was fragile on Thursday, with risky emerging markets stocks and currencies in the red as interest rate worries gathered steam and tensions in the Middle East showed little signs of easing.

MSCI’s gauge for emerging markets equities .MSCIEF had dropped 1.2% to a near two-week low by 0904 GMT.

The currencies index .MIEM00000CUS also fell 0.2%, pressured by rising U.S. bond yields on both long and short-dated tenors which hit multi-year highs.

With latest U.S. data hinting at a resilient economy, traders are pricing in restrictive monetary policy for a while as they await Federal Reserve Chair Jerome Powell’s remarks at 1600 GMT. US/

“As much as (EM central banks) like to keep up with the Fed, many of them had pushed rates into restrictive territory and do need to dial back a bit in order to support growth,” Jonathan Petersen, senior markets economist at Capital Economics said.

“It could keep rates elevated a little bit longer than maybe we had anticipated in emerging markets but ultimately this is a negative.”

Meanwhile, worries about China’s embattled property sector mounted, with Country Garden’s 2007.HK bondholders seeking urgent talks with the troubled property giant after it missed a $15 million coupon repayment, sources said.

Hong Kong’s Hang Seng .HIS tumbled 2.5%, bogged down by a 2.5% drop in property stocks .HSMPI.

Separately, data showed China’s September new home prices fell, dashing hopes of a turnaround in demand during a traditionally peak home buying period despite efforts to revive the crisis-hit sector.

Furthermore, the Israel-Hamas conflict continued to be factor for the mood across markets over the past couple of sessions as investors watched out for any signs of escalation.

The Israeli shekel ILS= held steady against the dollar, while the cost of insuring Israel’s debt against default shot over a 10-year high, according to S&P Global Market Intelligence.

Bringing some relief to inflation worries, oil prices eased after OPEC showed no signs of supporting Iran’s call for an oil embargo on Israel and as the U.S. planned to ease Venezuela sanctions. O/R

In eastern and central Europe, Polish September industrial output fell by 3.1% on an annual basis, missing a forecast of 3.6% decline. The zloty EURPLN= inched up 0.1% against the euro.

Romania’s leu EURRON=R was little changed ahead of the publication of central bank’s minutes on monetary policy issues due at 1200 GMT.

(Reporting by Johann M Cherian in Bengaluru; Editing by Alison Williams)