London - New US sanctions against Moscow triggered the biggest one-day rise in Russian debt insurance costs in more than four months on Thursday and pushed broader emerging-market stocks further away from recent 16-month highs.

Washington on Wednesday imposed its toughest sanctions yet on Russia over what the United States says is Moscow's failure to curb violence in Ukraine, a development that is likely to further weaken Russia's economic prospects.

The move set off a wave of risk aversion, with central European currencies trading in the red and equity markets in Warsaw, Budapest and Prague down 0.3-0.5 percent.

MSCI's emerging European equity index, where Russia is the biggest component, fell 1 percent.

The cost of insuring Russian debt against default jumped to two-month highs in the credit default swaps market.

Five-year CDS rose 26 basis points to 209 bps, according to Markit, the biggest one-day rise in percentage terms since early March.

Meanwhile, Ukrainian 5-year CDS widened to 775 bps from 767 bps the previous day.

“The market had a sense the past few days that more sanctions could happen. It's going to price this aggressively.” said Regis Chatellier, emerging market strategist at Societe Generale.

“From the West's perspective they could not have chosen a better time to intensify sanctions. You have an unfavourable macro situation in Russia,” he said, referring to a lacklustre outlook for Russia's commodity exports.

In Moscow, stock markets fell more than 2 percent and the rouble slumped 1 percent against the dollar.

Sovereign dollar bonds, including the most-traded 2030 issue, fell 1.5 cents.

Analysts expect investors to sell the bonds, even though the sanctions do not apply to previously issued debt.

“We cut our tactical overweight (OW) recommendation in Russian eurobonds to medium weight (MW), and cut our MW recommendation for local currency bonds on the back of fresh sanctions,” Commerzbank analysts said in a note.

More broadly, the MSCI global emerging equities index was down 0.35 percent.

A return of speculation that the US Federal Reserve is moving towards tighter monetary policy prompted Asian stocks to pull back from earlier gains that had been spurred by a strong session on Wall Street.

Turkish bond yields eased on Thursday before an expected rate cut and the lira slipped 0.2 percent.

The benchmark 10-year government bond yield eased to 8.8 percent from 8.82 at Wednesday's close.

The South African Reserve Bank, on the other hand, is expected by some analysts to raise interest rates by 25 bps.

Long-dated bond yields however are at six-week lows.

Bulgarian stocks drifted lower, down 0.1 percent in mid-morning trading, as the troubles in Bulgaria's banking industry continued.

The government said on Wednesday it could raise more than $2 billion of new debt, partly to help finance a bank rescue.

The situation in Russia has not deterred debt issuance in the region, where Macedonia is set to sell a seven-year euro-denominated bond at 4.25-4.375 percent.

“The current guidance for Macedonia is reasonable, although in the absence of the Russia news they probably would have been able to narrow the pricing,” said Jefferies analyst Richard Segal. - Reuters