* Turkish stocks hit record highs
* Fresh lockdowns imposed across Europe
* Hungarian central bank meeting eyed
By Shashank Nayar and Sruthi Shankar
Dec 15 (Reuters) - The Turkish lira held steady on Tuesday as investors weighed the impact of U.S. sanctions over the country's purchase of Russian S-400 defences, while emerging-market equities struggled as surging COVID-19 cases led to new lockdowns across Europe.
The lira TRY= extended gains to trade at 7.8346 per dollar. It had rallied 1% to as much as 7.8160 per dollar on Monday after Washington imposed on Ankara light, targeted sanctions that analysts said could expand depending on how ties between the NATO allies evolve under a Joe Biden White House. threat of U.S. punishment had weighed on the lira for months, but the sanctions target only Turkey's top defence development body, not the broader economy.
"It was clearly better than feared," said Peter Kinsella, head of FX strategy at UBP. "The fact they had only placed sanctions on the defence industry and not the banks is pretty important."
Turkey's benchmark stock index .XU100 reached a record high, with Halkbank HALKB.IS jumping 5%. The bank was previously indicted on charges of helping Iran evade U.S. sanctions.
Other emerging-market currencies also gained, with Russia's rouble RUB= up 0.6%, recovering partly from losses the day before.
Its central bank meets on Friday and is widely expected to leave its main interest rate unchanged at a record low, according to a Reuters poll. But inflation has recently exceeded its target, limiting room for further rate cuts. underlying story for the rouble is pretty constructive. You've got oil prices that are looking a lot more solid than they were before. That's very good, particularly for their current account surplus," Kinsella said.
The mood was glum across developing-world stocks, with the MSCI EM equities index .MSCIEF dropping 0.3% as surging COVID-19 deaths globally and new lockdowns outweighed optimism about the availability of vaccines.
The number of coronavirus deaths in the United States crossed 300,000 on Monday as the hardest hit nation started its first vaccine inoculations, while tighter COVID-19 restrictions were imposed on London. eastern Europe, Hungary's forint EURHUF= was at a one-month high versus the euro before a central bank meeting where policymakers are expected to leave its base rate unchanged at 0.6%. some analysts say the bank could reverse September's 15-basis-point increase by the end of the first quarter if market conditions remain favourable and inflation declines.
For GRAPHIC on emerging market FX performance in 2020, see http://tmsnrt.rs/2egbfVh For GRAPHIC on MSCI emerging index performance in 2020, see https://tmsnrt.rs/2OusNdX
For TOP NEWS across emerging markets CENTRAL EUROPE market report, see CEE/
For TURKISH market report, see .IS
For RUSSIAN market report, see RU/RUB