Stocks, FX drop as Trump government takes shape; CEE data in focus
Updated at 0917 GMT
Romanian c.bank raises inflation outlook
Slowdown worries mount amid weak Indian corporate earnings
MSCI EM stocks index down 1.8%, FX off 0.4%
By Johann M Cherian
Nov 12 (Reuters) -Most emerging markets currencies and stocks dropped on Tuesday, as investors braced for a likely "Red Sweep" in the U.S., while also assessing inflation reports from central and eastern Europe and a disappointing earnings season in India.
MSCI's EM stocks index .MSCIEF lost 1.8%, to touch levels seen about two-months ago, while a gauge for currencies .MIEM00000CUS dropped 0.4% to levels seen last around mid-August.
U.S. President-elect Donald Trump is expected to tap Senator Marco Rubio to be his secretary of state, who has supported hawkish stances on China, Iran and Cuba.
"The foreign policy of the next U.S. administration is already well flagged by Trump and Vance's comments over the last year: restraint over intervention in general and hawkishness on China and Iran. Rubio's appointment reinforces that," said Hasnain Malik, managing director of emerging and frontier markets equity strategy at Tellimer.
Further, data provider Decision Desk HQ projected that the Republican Party had won a majority in the U.S. House of Representatives, paving the way for Trump's party to control both chambers of Congress and the presidency.
The triple win - a so-called "Red Sweep" - could make it easier for him to follow through on campaign rhetoric that analysts say could be detrimental for emerging markets broadly.
Currencies in top developing economies such as China CNH=, India INR=, South Africa ZAR=, Turkey TRYTOM=D4, Poland EURPLN= traded flat to lower.
Lacklustre lending data also weighed on Chinese stocks .SSEC, .CSI300 that logged the steepest declines in nearly a month, while Hong Kong .HSI equities hit a more than one-month low.
In South Asia, Indian stocks .NSEI, .BSESN fell 0.8% ahead of October inflation data. The index has halved its year-to-date gains to about 10%, from 20% in September when it hit record highs.
Top Indian companies registered their worst quarterly showing in more than four years for the July-September period, raising concerns that a lurking economic slowdown had begun to affect corporate earnings.
In central and eastern Europe, Hungary's forint EURHUF= inched up 0.1%, while Romania's leu EURRON= was muted after separate reports showed inflation in the economies ticked above their respective central banks' targets, spurring expectations that interest rates could be left unchanged at upcoming meetings, despite sluggish economic growth.
Romania's central bank also raised its inflation forecast for this year and the next due to fiscal correction measures ahead of a parliamentary election. The country's deficit is more than double the European Union bloc's ceiling.
Israel's shekel ILS= was flat. Investors monitored reports of talks between Trump and Israeli officials, and possibilities of a ceasefire to the Middle East conflict.
Sri Lankan equities .CSE rose 1%, while hard-currency bonds USY8137FAR92=TE, US56113LAA70=TE dipped ahead of parliamentary elections later in the week.
For GRAPHIC on emerging market FX performance in 2024 http://tmsnrt.rs/2egbfVh
For GRAPHIC on MSCI emerging index performance in 2024 https://tmsnrt.rs/2OusNdX
Reporting by Johann M Cherian in Bengaluru; Editing by Alex Richardson
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