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EM stocks up 1.1%, FX up 0.25%

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Czech Republic holds elections on October 3-4

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Russia to submit draft budget in parliament

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Israel markets jump on renewed ceasefire optimism

By Nikhil Sharma

Sept 29 (Reuters) - Emerging market stocks rebounded

more than 1% on Monday and currencies strengthened against a

soft dollar, while the Czech crown came under pressure as

investors braced for a general election later this week.

The MSCI index of emerging market equities jumped

1.1% following a 1.35% plunge on Friday as investors cashed in

profits as they approached the month-end.

EM stocks have jumped about 6.5% in September so far,

outpacing Wall Street's benchmark S&P 500 index that has

managed a gain of 2.8%.

A gauge of regional currencies rose 0.25%

after declining for seven straight sessions - its longest such

streak since July.

The currency index capitalised on a weaker dollar as

investors feared a potential U.S. government shutdown if the

Congress fails to pass a funding bill before the fiscal year

ends on Tuesday.

Without passage of funding legislation, parts of the

government would close on Wednesday, the first day of its 2026

fiscal year.

Meanwhile, the Czech crown slipped 0.24% on Monday

and equities in Prague rose 0.4% as investors geared up

for this week's parliamentary election, with the opposition ANO

party of former Prime Minister Andrej Babis leading opinion

polls ahead of the main centre-right ruling parties.

While no party is seen winning a majority, a possible

ANO-led coalition could stall defence supplies to Ukraine,

reject the EU emissions-allowance system, and increase state

control over public broadcasters by placing them on direct

state-budget funding.

"The perception of each market, each country, each economy

in Eastern Europe is very much dependent on what happens on the

political front in each country, which affects the flow of

European funds in the particular country," said Elena Loven,

senior portfolio manager, EM equities at Swedbank Robur.

"If you look at what happened in Poland, we clearly

underestimated the opposition. We don't want to make the same

mistake in the Czech Republic. You have to take risk into

account as an investor and be aware that elections are always a

risk and a possibility."

Meanwhile, Polish stocks added 0.1%, taking their

monthly gains to 1.5% so far - among the top performers from the

region. The zloty was trading 0.2% lower and was up

0.2% month-to-date.

Stocks recovered in September after MAGA-allied President

Karol Nawrocki took office last month, underscoring a deepening

political divide that led to Poland's rating outlook being

revised to "negative" on concerns about public finances.

Last week, the Czech National Bank voiced the need for a

tighter monetary policy to combat inflationary risks, keeping

rates unchanged for the third time in a row.

In Russia, the rouble strengthened 0.6% against the

dollar. The country is expected to submit its draft budget to

parliament later in the day as the economy explores ways to make

ends meet in the fourth year of its war in Ukraine.

The finance ministry last week proposed an increase in

value-added tax to fund military expenditure and curb a swelling

budget deficit.

Russia amped up its attacks on Ukraine as a weekend strike

at Kyiv and other parts killed at least four people and injured

dozens.

Elsewhere, Israel's shekel surged to an eleven-week

peak against the dollar, and Tel Aviv stocks extended

their winning streak for a third straight session on renewed

optimism over a potential ceasefire in Gaza after U.S. President

Donald Trump disclosed receiving a "very good response" to his

proposed peace plan.

The Bank of Israel will announce its interest rate decision

later in the day.

In other news, S&P upgraded Morocco to investment grade on

Friday. The Moroccan dirham was largely steady.

For TOP NEWS across emerging markets

For CENTRAL EUROPE market report, see

For TURKISH market report, see

For RUSSIAN market report, see

(Reporting by Nikhil Sharma in Bengaluru; Editing by Mrigank

Dhaniwala)