Emerging stocks hovered near their lowest levels in a week on Wednesday while the Egyptian pound slipped to a record low despite news of a $2.5 billion loan lifeline from Qatar.

The MSCI emerging markets index has lost half its US budget deal-inspired gains and has fallen nearly two percent from 9-1/2 month highs set last week.

European shares rose to new 22-month highs after aluminium firm Alcoa gave the US earnings season a strong start but investors will want to see this sustained across countries and sectors before being convinced of an economic uptick.

Shares in India and South Korea were weaker on concern that fourth-quarter earnings could disappoint while mainland Chinese equities closed flat.

The Egyptian pound traded at a record low, with the central bank saying the cut-off price at Wednesday's dollar auction was 0.47 percent weaker than Tuesday's level.

But $2.5 billion in aid from energy exporter Qatar helped Egyptian credit default swaps trade at their lowest levels in almost a week. Cairo stocks rose 1.2 percent, extending gains as investors view the currency depreciation as a longer-term positive for the economy.

“Given the reserves of the GCC at over $1 trillion and the importance of stability in Egypt to Gulf monarchs, it would be surprising to see Egypt run out of dollars,” said Emad Mostaque, a strategist at Noah Capital Markets.

In emerging Europe, Turkish stocks dipped below Tuesday's record high and South African stocks also held below recent record peaks. Moscow fell 0.5 percent.

Bond investors were focused on Poland, where the central bank is expected to cut interest rates for a third straight month by 25 basis points. Poor recent economic data has however prompted some analysts to predict a 50 bps cut.

The zloty fell 0.2 percent against the euro.

“Expectations for any surprises to be on the downside would be logical given the rapid slowdown in both the economy and inflation,” SEB analysts said in a note.

Poland, along with Turkey, has kicked the year off with emerging sovereign Eurobonds. Waraw and Ankara launched euro and dollar bonds respectively, both of which were oversubscribed.

One trader said the Polish issue was trading well and was quoted above par, but the price of the Turkish bond, issued at Turkey's lowest dollar yield ever, was down slightly.

Emerging sovereign dollar bond spreads widened 6 basis points over US Treasuries. - Reuters