* Euro zone business activity slowed less than expected - PMI

* Emerging EM shares outside Asia rise

* Russian gas supply worries keep CEE currencies subdued

* Indonesian rupiah jumps after surprise rate hike

By Susan Mathew

Aug 23 (Reuters) - Emerging market shares and currencies cut session losses on Tuesday as better-than-expected business activity data in the euro zone came as a welcome relief amid recession fears.

A gas crisis in Europe, China growth slowdown worries, and fears that the U.S. Federal Reserve may tolerate some level of weakness in the U.S. economy to tame inflation has sapped risk appetite recently, leaving the safe-haven dollar just inches away from its highest in two decades.

Some relief came from the euro zone on Tuesday where data showed business activity slowed less than expected in August.

As euro zone stocks .STOXXE rose, counterparts in emerging Europe took heart. Polish .WIG and Romanian .BETI stocks climbed 0.7% and 0.4%, and more broadly, Turkish, South African and Russian stocks rose around 1% each.

MSCI's index of emerging markets shares .MSCIEF extended declines to fourth straight session as Asian shares extended declines, but cut session losses of up to 0.7% to last trade down 0.3%. The currencies counterpart .MIE00000CUS erased losses to trade flat.

Sentiment remained subdued on worries about reduced Russian gas supplies hitting growth in Europe. Hungary's forint EURHUF= hit near six-week lows against the euro and the Polish zloty PLNUSD=R fell towards its weakest in one-month.

"We are bearish on the Polish zloty on and other EM currencies in Eastern Europe, because of this gas crisis," said Jakob Christensen, chief analyst and head of EM research at Danske Bank.

"More fundamentally, the tightening of global financial conditions will slow global growth and have a negative effect on business sentiment, more specifically to the EMs."

The Indonesian rupiah IDR= , meanwhile, jumped 0.3% after the central bank hike its benchmark interest rate by 25 basis points to 3.75% - the first hike since 2018. Majority in a Reuters poll had expected the bank to hold the rate steady.

Asian central banks have generally lagged emerging market peers in the most recent tightening cycle as they prioritised stimulating growth in a post COVID environment, over inflation control.

In Pakistan, Prime Minister Shehbaz Sharif travelled to Qatar on Tuesday in the hope of generating trade and investment for his cash-strapped country. The visit comes ahead of ahead of an International Monetary Fund meeting next week that is expected to approve a $1.2 billion tranche of lending.

Pakistan's April 2024 dollarbond US695847AK91=TE ticked up, while others XS1299811486=TE US695847AR45=TE extended declines and the currency PKR= dipped after the central bank on Monday held its main policy rate at 15% after hiking by 125 bps in July. For GRAPHIC on emerging market FX performance in 2022, see Link For GRAPHIC on MSCI emerging index performance in 2022, see Link

For TOP NEWS across emerging markets

For CENTRAL EUROPE market report, see

For TURKISH market report, see

For RUSSIAN market report, see
Reporting by Susan Mathew in Bengaluru; Editing by Angus MacSwan