* Emerging stocks edge up, debt spreads tighten
* Russian stocks hit 2-mth high, S.Africa 5-wk peak
* Turkey markets digest cabinet changes
* Israel c.bank says will act to curb house prices
By Carolyn Cohn
LONDON, July 7 (Reuters) - Stock markets in Russia and South Africa bounced on Thursday, as hopes China is nearing the end of its tightening cycle buoyed commodity prices, though central European markets were mainly steady ahead of an expected euro zone rate rise.
China raised interest rates for the third time this year on Wednesday, helping Chinese stocks and making clear that taming inflation remains a top priority even as the pace of economic growth gently eases.
Russian stocks rose more than 1 percent to hit two-month highs, with oil LCOc1 at its highest in three weeks. South African stocks hit five-week highs and the rand rose half a percent, with gold testing two-week highs.
The euro zone sovereign debt crisis continues to keep a lid on riskier emerging market assets, however, after Moody's this week downgraded Portugal's rating to a junk level of Ba2, and warned of a second bail-out.
The euro/dollar exchange rate is choppy as markets focus on the conflicting forces of a debt crisis and rate hikes, analysts said, leaving emerging European currencies uncertain.
"Spreads in Greece are continuing to widen out, it's keeping the market quite jittery," said Imran Ahmad, emerging FX strategist at RBS.
"Everyone is expecting a euro zone rate hike today, the market consensus is that they will hint at another rate increase."
Other reports on Thursday kept investors uncertain about emerging markets.
Food prices, a concern for emerging markets where food tends to makes up a large part of consumer price baskets, showed a surprise rise in June, according to the U.N. Food and Agriculture Organisation
Emerging economies grew at their weakest pace in two years in the second quarter of this year, the HSBC's quarterly index showed, though a sharp fall in input cost inflation suggested that efforts to curb price rises had gained traction.
The MSCI emerging equities index edged up 0.2 percent, while the Thomson Reuters emerging Europe index softened to a one-week low.
Romanian stocks hit seven-week highs, following a ratings upgrade by Fitch to investment grade earlier this week.
Romania is now rated at investment grade by two of the three major ratings agencies, which will enable it to attract a larger number of investors, analysts say.
Emerging European currencies were largely steady within recent ranges.
Emerging sovereign debt spreads tightened by 4 basis points to 267 bps over U.S. Treasuries.
Sri Lanka has mandated four banks for a series of investor meetings starting July 11, expected to result in a $1 billion 10-year bond, according to IFR, a Thomson Reuters news and markets information service.
Investors in Turkey digested a cabinet reshuffle made on Wednesday in which Prime Minister Tayyip Erdogan retained Finance Minister Mehmet Simsek to manage an overheating economy, and named Zafer Caglayan as economy minister.
"Bottom line -- no major changes in the way the economy/finances will be run," said Simon Quijano-Evans, chief EEMEA economist at ING, in a client note.
The shekel was up 0.25 percent as Israel's central bank governor Stanley Fischer said policymakers would act to further slow the pace of house price increases.
The central bank paused in its rate-tighening cycle in June, leaving rates unchanged for only the second time in six months.
In Serbia, the dinar fell half a percent on the day after the central bank cut rates for the second straight month.
(Editing by Anna Willard)