Markets Rally Ahead of U.S. Election, Turkey's Inflation in Focus

Emerging markets saw currency and equity increases amid U.S. election anticipation, with Kamala Harris leading in Iowa. Investors focused on Turkey's inflation and credit rating upgrade. Turkey's equities dipped, Hungary's forint remained low, Poland's zloty rose, and India faced profit booking. Moldova's leu weakened post-election.

On Monday, emerging market currencies and equities experienced an uptick ahead of the U.S. presidential election results. Investors are also paying close attention to Turkey's inflation statistics and its recent credit rating boost. The emerging markets currency index, after a stagnant three weeks, rose by 0.17% against a weaker U.S. dollar. This boost came as polls indicated Democratic candidate Kamala Harris leading in Iowa, a key state previously won by Donald Trump.

Harris' policies are perceived as less inflationary than Trump's, reducing pressure on emerging market assets. Meanwhile, the financial community patiently awaits a Federal Reserve policy decision. Turkey's stocks slipped by 1.4% following a 35 basis points bond yield rise, influenced by unexpected October price growth and anticipations of prolonged high interest rates. Some respite was seen late Friday when S&P Global raised Turkey's long-term sovereign credit ratings for the second time this year, citing strategic reserve accumulation and disinflation stemming from stringent monetary policies.

Elsewhere in Europe, Hungary's forint neared 22-month lows due to weak October manufacturing data, though analysts anticipate U.S. election results could hold more sway over regional financial decisions. Meanwhile, Poland's zloty climbed 0.4% in advance of a national central bank policy decision. Indian stocks fell over 1.5%, attributed to profit-taking despite robust manufacturing growth in October. Rising crude oil prices, essential for developing economies, also captured traders' attention. Moldova's leu depreciated against the euro following pro-Western Maia Sandu's presidential election victory.

(With inputs from agencies.)