EMERGING MARKETS-EM stocks rally on potential end to US shutdown

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EM stocks up 1.35%, FX up 0.16%

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S&P affirms Poland's outlook at 'stable'

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US exempts Hungary from Russia sanctions after Trump-Orban meet

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Hungary secures financial shield agreement with WashingtonCzech jobless rate edges slightly up in October

By Nikhil Sharma

Nov 10 (Reuters) - Emerging Market stocks rallied on Monday, mirroring global equities, on optimism that the prolonged U.S. government shutdown may soon end, ahead of key inflation data releases across the region throughout the week.

MSCI's index for Emerging Market equities climbed 1.35%, kicking off the week on a stronger note after considerable losses in the previous week.

Global sentiment improved after the U.S. Senate on Sunday advanced a measure aimed at reopening the federal government and funding it through January, ending a shutdown that has sidelined federal workers, delayed food aid and snarled air travel.

"There are still more hoops to jump through before the 1.4 million federal workers get their jobs back, but this first step towards ending the shutdown has received a warm reception from financial markets," Kathleen Brooks, research director at XTB, said in a note.

Equities in Asia surged, while futures tracking Wall Street's main stock indexes moved sharply higher to indicate bigger moves at open.

A broader gauge tracking EM currencies rose 0.16% after declining about 0.4% in the previous week. A softer dollar on the possible end to the shutdown helped boost currencies elsewhere.

In Poland, the currency zloty was largely steady, while Warsaw's benchmark index jumped 1.55% to an all-time high.

The moves came after ratings agency S&P affirmed Poland's outlook at "stable" on Friday, noting strong medium-term growth prospects even as debt risks rise. In contrast, Fitch and Moody's have revised Poland's outlook to "negative".

Investors will look ahead to the week's key data, including October inflation numbers and third-quarter GDP figures, to evaluate the health of the economy amid fiscal uncertainties.

A slowdown in inflation and an improvement in its outlook had prompted the National Bank of Poland last week to extend its policy easing cycle by slashing rates by another 25 basis points to 4.25%.

The Hungarian forint rose 0.46% to a fresh 1-1/2-year high as investors welcomed Washington's temporary exemption for Hungary from U.S. sanctions on the use of Russian oil and gas, marking a win for Prime Minister Viktor Orban after his friendly meeting with President Donald Trump.

Budapest stocks jumped 1% to a record high on Monday.

Orban termed the agreement a "financial shield" and has committed to buying U.S. liquefied natural gas with contracts valued at some $600 million.

On the data front, investors will assess Hungary's inflation figures on Tuesday, a potentially decisive gauge of the central bank's policy decision next week.

In the Czech Republic, the October CPI data will also be in focus on Tuesday, given that the central bank has flagged upside price risks from wage growth and potential government spending, which forced it to keep interest rates on hold last week.

The Czech koruna was down 0.1%, while Prague's main stock index rose 0.63% to hit an all-time high. Fresh data showed the unemployment rate rose more than expected to 4.6% last month.

Elsewhere in EM, S&P Global revised Israel's outlook to "stable" from "negative" on Friday, citing reduced probability of security risks after an October ceasefire agreement with Hamas.

Additionally, the ratings agency also raised Ghana's rating to "B-/B" from "CCC+/C", crediting the country's strengthening balance of payments and fiscal positions. Ghana's dollar bonds edged up on Monday.

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For RUSSIAN market report, see (Reporting by Nikhil Sharma; Editing by Vijay Kishore)