EMERGING MARKETS-Romanian markets rally as pro-EU centrist wins presidency

By Pranav Kashyap and Nikhil Sharma

May 19 (Reuters) - Romanian assets surged on Monday after a pro-European Union centrist won the nation's presidential run-off, calming investor fears of a pivot to a far-right political path inspired by U.S. President Donald Trump.

The Romanian leu EURRON= surged 1.7% against the euro, on course for its strongest intraday percentage gain in more than 16 years.

Bucharest's stock index .BUX rallied as much as 4.1%, positioning it for its most substantial single-day percentage advance in over three years.

Romania's long-dated euro-denominated bonds also found strong bids, with the 2049 maturity XS1968706876=TE up three cents, while the 2050 issue gained over two cents, according to Tradeweb data.

Nicusor Dan's presidential triumph on Sunday was fuelled by a last-minute jump in support. Investors took comfort in Dan's unwavering pro-EU and pro-NATO stance, coupled with his strong articulation of Romania's support for neighbouring Ukraine against Russia's invasion.

This bullish sentiment marks a sharp reversal from recent weeks as investors had been shedding Romanian exposure since hard-right eurosceptic George Simion took the lead in the first round of the presidential election two weeks ago.

"The outcome of the election matters beyond Romania – a win for Simion would have cast doubt over the nation's future in both the EU and NATO, shaking investor confidence and introducing uncertainty into Romania's economic outlook," said Kate Leaman, chief market analyst at AvaTrade.

Concerns had mounted that Simion's critical posture towards EU leadership and his reluctance regarding military aid to Ukraine could endanger Romania's international standing and introduce questions over its investment grade rating.

"The most market-negative outcome is averted. A rating downgrade.. is now less of a concern but not something to rule out," Nicolaie Alexandru-Chidesciuc at JPMorgan said.

JP Morgan also moved its exposure on Romania's international bonds to "marketweight" from "underweight" and to "overweight" from "marketweight" on local government bonds.

In the broader emerging markets sphere, MSCI's gauge for EM currencies .MIEM00000CUS was on track for its fourth consecutive day of advances, though its parallel index tracking stocks .MSCIEF fell 0.5%.

Meanwhile, Poland held its first-round of presidential elections on Sunday. Rafal Trzaskowski, perceived by markets as a hard-right candidate with a stance similar to Simion's, took a narrow lead against liberal contenders, according to the electoral commission, injecting a degree of uncertainty.

The Polish zloty EURPLN= slipped 0.3%. Meanwhile, Warsaw's stock index .WIG20 lost 1.2%.

The second round of Polish elections is expected on June 1.

Meanwhile, Ukraine's dollar bonds were steady on the day. Washington has lately been doubling down on its efforts to end Moscow's three-year war in Ukraine, Europe's deadliest conflict since World War Two. A call between Trump and Russian President Vladimir Putin was due later in the day.

Further afield, weaker-than-expected economic data from China exerted downward pressure on its equity markets. The blue-chip CSI300 .CSI300 index lost 0.3%, while Hong Kong's Hang Seng .HSI was flat.

Globally, overall equity sentiment was more circumspect after Moody's downgraded the U.S. sovereign credit rating by one notch to "Aa1" on Friday, citing the country's burgeoning debt.

The move could complicate President Donald Trump's efforts to cut taxes, sending ripples through global markets.

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