EMERGING MARKETS-EM stocks rise as Middle East tensions thaw; currencies firm

* Trump signals no new military action against Iran

* EM stocks scale 19-month highs on demand for risky assets

* Chinese equities rise as data shows room for stimulus

* Turkish lira, Russian rouble firm to the dollar

* South Africa’s rand steady ahead of economic data

Jan 9 (Reuters) - Emerging market stocks rose to near 19-month highs on Thursday as Washington and Tehran defused a crisis after Iran’s attack on Iraqi bases housing U.S. soldiers caused no casualties, easing fears of a wider war in the Middle East.

MSCI’s basket of emerging market stocks jumped 1.4% and was on course for its best day in nearly a month, also boosted by a confirmation from Beijing that Vice Premier Liu He would sign a Phase 1 trade deal in Washington next week.

Chinese stocks ended the day about 1% higher, as data showed factory-gate prices fell at a slower pace in December, giving Beijing room for further monetary stimulus.

The MSCI stock index had hit a two-and-a-half week low on Wednesday, when investors fled riskier assets for the safety of gold after Iran retaliated for the killing of commander Qassem Soleimani in a U.S. drone attack last week.

But U.S. President Donald Trump on Wednesday responded with new economic sanctions rather than further military action, while Iranian officials said the missile attack concluded their response to the killing.

“The nightmare scenario of a full-blown war looks to be over and investors can finally breathe a sigh of relief,” said Lukman Otunuga, senior research analyst at FXTM.

“Yet even if a conflict has been averted, the road ahead remains bumpy and investors should remain on standby for further possible retaliatory measures.”

Sending mild jitters through financial markets earlier in the session, two rockets fell on Baghdad’s Green Zone, which houses foreign missions and government buildings. There were no casualties, and no immediate claim of responsibility.

The broad-based optimism also powered a basket of developing world currencies to its highest level since June 2018.

Turkey’s lira firmed nearly half a percent to the dollar, while the Russian rouble rose for the second straight day, hovering near two-year highs.

Market activity in Russia was expected to increase after the long New Year and Orthodox Christmas holidays from Jan. 1-8.

In South Africa, the rand gained ahead of December business confidence data and November manufacturing figures due later in the day.

The country has been grappling with prolonged power cuts that have dimmed growth outlook after pushing Africa’s most industrialised economy to a technical recession in the first half of last year.

Elsewhere in emerging European economies, the Hungarian forint, the Polish zloty and the Czech crown eased slightly to a firmer euro.

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For RUSSIAN market report, see (Reporting by Sagarika Jaisinghani in Bengaluru; Editing by Shailesh Kuber)