April 27, 2020 / 9:46 AM / a month ago

CEE MARKETS-Assets firm on optimism over economies opening, eye on Hungarian cbank meeting

    By Anita Komuves
    BUDAPEST, April 27 (Reuters) - Central European stocks and
currencies firmed on Monday, boosted by a risk-on mood in global
markets with the ECB expecting to widen its stimulus package
later this week and the Bank of Japan pledging to buy unlimited
amounts of government bonds.
    The prospect of a gradual easing of coronavirus lockdown
measures to restart economic activity in several European
countries also lifted investor sentiment. 
    Stock markets in Budapest, Prague and Warsaw
 were all up more than 1% by 0758 GMT on Monday, with
Budapest leading regional gains. 
    Although both the Fed and the ECB have rate-setting meetings
this week, analysts at CIB Bank in Budapest said they
anticipated no major announcements as central banks could wait
until they can assess the effects of their measures so far. 
    "Most probably the ECB will raise the limit on one of its
programs and will stress the importance of fiscal policy," they
added in a note. 
    The National Bank of Hungary holds a rate-setting meeting on
Tuesday. A Reuters poll last week showed analysts expect the
bank to leave its key rates unchanged after a surprise increase
in lending rates early this month.
    On Tuesday the NBH will decide about the scale and terms of
its planned asset-purchasing programme, which investors will eye
closely.
    Hungary's economic contraction this year is likely to be
deeper than the government's 3% projection last month and the
budget deficit could widen above 3% per GDP, Finance Minister
Mihaly Varga told Reuters on Friday.
    The forint firmed 0.65% and was trading at 353.80
to the euro on Monday, well above the record low near 370 versus
the euro that it hit on April 1. 
    "The forint is buoyed by the general risk-on mood in global
markets, everyone is happy about the prospect of opening up
business activity," a Budapest-based trader said.
    "There is no clear direction, however. Investors are
waiting, looking for new ideas and hoping for more good news."
    Elsewhere, the Polish zloty was up 0.46% while the
Czech crown strengthened 0.58%. 
    In Romania, both the stock market and the leu
 firmed even though on Friday, Moody's followed S&P and
Fitch to revise Romania's rating outlook from stable to negative
due to concerns over the public deficit.
    All three agencies now rate Romania on their lowest
investment grades.
    "The news is hardly any surprise and Romania’s Eurobonds are
already traded one notch lower than the actual rating would
suggest, so we project nil reaction on the market today,"
Raiffeisen said in a note, adding that Romania had avoided an
outright ratings downgrade.
    "The leu is moving in line with the region albeit at a
slower pace," a trader in Bucharest said.
    Before the pandemic, Romania was targeting a deficit of 3.6%
of GDP this year. With the damage from the coronavirus outbreak,
the government estimates the deficit will reach 6.7% in 2020. 
    "Risk of a downgrade to junk rating by the end of this year
is significant," Romanian bank BCR said in a research note.
        
            CEE        SNAPSHOT    AT                         
            MARKETS               0958 CET            
                       CURRENCIE                              
                       S                              
                       Latest     Previous  Daily     Change
                       bid        close     change    in 2020
 Czech                   27.1050   27.2620    +0.58%    -6.17%
 crown                                                
 Hungary                353.8000  356.0900    +0.65%    -6.40%
 forint                                               
 Polish                   4.5187    4.5393    +0.46%    -5.80%
 zloty                                                
 Romanian                 4.8380    4.8401    +0.04%    -1.03%
 leu                                                  
 Croatian                 7.5500    7.5535    +0.05%    -1.39%
 kuna                                                 
 Serbian                117.5900  117.6500    +0.05%    -0.02%
 dinar                                                
 Note:      calculated from                 1800 CET          
 daily                                                
 change                                               
                                                              
                       Latest     Previous  Daily     Change
                                  close     change    in 2020
 Prague                   860.53  851.9100    +1.01%   -22.87%
 Budapest               33434.53  32964.67    +1.43%   -27.45%
 Warsaw                  1619.20   1601.91    +1.08%   -24.69%
 Bucharest               7952.16   7917.72    +0.43%   -20.30%
 Ljubljana                773.49    773.49    +0.00%   -16.46%
 Zagreb                  1568.29   1565.02    +0.21%   -22.26%
 Belgrade   <.BELEX15     677.30    676.38    +0.14%   -15.52%
            >                                         
 Sofia                    450.25    448.61    +0.37%   -20.75%
                                                              
                       Yield      Yield     Spread    Daily
                       (bid)      change    vs Bund   change
                                                      in
 Czech                                                spread
 Republic                                             
   2-year   <CZ2YT=RR     0.7150    0.0150   +141bps     +1bps
            >                                         
   5-year   <CZ5YT=RR     0.9020   -0.1740   +157bps    -18bps
            >                                         
   10-year  <CZ10YT=R     1.3580    0.0690   +183bps     +8bps
            R>                                        
 Poland                                                       
   2-year   <PL2YT=RR     0.6010   -0.0070   +130bps     -2bps
            >                                         
   5-year   <PL5YT=RR     0.9690   -0.0280   +163bps     -3bps
            >                                         
   10-year  <PL10YT=R     1.3540   -0.0190   +183bps     -1bps
            R>                                        
            FORWARD                                           
                       3x6        6x9       9x12      3M
                                                      interban
                                                      k
 Czech Rep          <       0.27      0.30      0.33      0.91
            PRIBOR=>                                  
 Hungary            <       1.21      1.14      1.09      1.10
            BUBOR=>                                   
 Poland             <       0.28      0.25      0.25      0.69
            WIBOR=>                                   
 Note: FRA  are for ask prices                                
 quotes                                               
 ***************************************************          
 ***********                                          
 
 (Additional reporting by Luiza Ilie in Bucharest
Editing by Mark Heinrich)
  
 
 
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