September 2, 2019 / 9:46 AM / 3 months ago

CEE MARKETS-Currencies firm slightly, PMI data show some improvement

    By Krisztina  Than
    BUDAPEST, Sept 2 (Reuters) - Central European currencies
firmed on Monday in a positive correction after a week of
losses, aided by fresh PMI data showing a slight improvement in
economic activity in August across the region after a dip in
July.
    However, worries over the global economy, U.S.-China trade
tensions and the threat of a disorderly exit by Britain from the
European Union continue to weigh on investor sentiment, and
could also dent the region's economic prospects, analysts said.
    Growth is expected to slow in the remainder of the year and
next year in Central Europe, which has produced very strong
expansion in the past years, well outpacing the euro zone.
    "The improvement in PMI only means that the activity was
shrinking at a slower pace...This is not a signal of an
acceleration in the economy," said Piotr Bielski, the head of
economic analysis department at Santander Bank Polska. 
    "This doesn’t change (the fact) that rising global trade war
tensions and a slowdown in other European countries will keep on
affecting Polish companies."
    Hungary's seasonally adjusted Purchasing Managers' Index
rose to 52.6 in August from a revised 51.2 in July, while the
Polish IHS Markit purchasing managers' index for manufacturing
rose to 48.8 from 47.4 in July, remaining below the 50.0 level
that separates growth from contraction.
    The Czech headline PMI reading improved to 44.9 in August
from a 10-year low of 43.1 in July, data compiled by IHS Markit
showed. 
    The Hungarian forint, which hit a record-low of
331.85 last Thursday, edged up 0.14% to 330.92 per euro, while
the Polish zloty was 0.27% stronger on Monday from
Friday's levels.
    David Nemeth, an analyst at K&H Bank in Budapest, said
growth in the region was expected to slow in the rest of 2019
and next year gradually, but "not tragically."
    This was a base case scenario. However, if there is a hard
Brexit, or the global trade war worsens significantly, that
could shave more off Central Europe's GDP growth, he said.
    "Today's PMI data I would say is neutral," Nemeth said.
    "The Hungarian data is very much influenced by the fact that
there are big construction projects underway, and EU-funded and
other investment projects, which bring some impetus."
    The Czech crown was also marginally firmer, rising 0.2%
versus the euro in early trade.
    "Signals from domestic industry give the central bank an
argument for maintaining its wait-and-see attitude with stable
interest rates for the remainder of this year," Radomir Jac, CEE
chief economist at Generali Investments said.
    Data on Friday showed Poland's economy expanded by 4.5%
year-on-year last quarter and the Czech Republic's by 2.7%, both
faster than flash estimates, giving comfort to a region where
domestic demand is a key growth driver as the euro zone slows
and key trade partner Germany flirts with recession.
    Hungary's economy expanded by 4.9% in the second quarter
year on year. 
    
    
    
                        CEE        SNAP   AT                    
                        MARKETS    SHOT  1011            
                                         CET             
                                   CURR                         
                                   ENCI                  
                                   ES                    
                                   Late  Previ  Daily    Change
                                   st    ous             
                                   bid   close  change   in 2019
 EURCZK=    Czech                  25.9  25.96   +0.18%   -0.83%
            crown                   220     90           
 EURHUF=    Hungary                330.  331.3   +0.14%   -2.97%
            forint                 9200    700           
 EURPLN=    Polish                 4.36  4.376   +0.27%   -1.73%
            zloty                    49      5           
 EURRON=    Romanian               4.72  4.726   +0.00%   -1.52%
            leu                      60      0           
 EURHRK=    Croatian               7.40  7.405   -0.00%   +0.05%
            kuna                     60      7           
 EURRSD=    Serbian                117.  117.7   +0.14%   +0.64%
            dinar                  5500    200           
            Note:       calculated from         1800            
            daily                               CET      
            change                                       
                                                                
                                   Late  Previ  Daily    Change
                                   st    ous             
                                         close  change   in 2019
 .PX        Prague                 1040  1037.   +0.27%   +5.43%
                                    .11   2700           
 .BUX       Budapest               3978  39794   -0.02%   +1.66%
                                   7.59    .12           
 .WIG20     Warsaw                 2134  2135.   -0.04%   -6.24%
                                    .46     25           
 .BETI      Bucharest              9234  9235.   -0.02%   +25.06
                                    .21     72                 %
 .SBITOP    Ljubljana              852.  854.8   -0.27%   +6.00%
                                     51      2           
 .CRBEX     Zagreb                 1865  1873.   -0.41%   +6.68%
                                    .63     36           
 .BELEX15   Belgrade    <.BELEX15  745.  745.0   +0.12%   -2.06%
                        >            98      5           
 .SOFIX     Sofia                  569.  567.4   +0.31%   -4.24%
                                     23      5           
                                   BOND                         
                                   S                     
                                   Yiel  Yield  Spread   Daily
                                   d                     
                                   (bid  chang  vs Bund  change
                                   )     e               in
            Czech                                        spread
            Republic                                     
 CZ2YT=RR     2-year    <CZ2YT=RR  1.13  0.025   +206bp    +3bps
                        >            20      0        s  
 CZ5YT=RR     5-year    <CZ5YT=RR  0.85  0.019   +180bp    +2bps
                        >            70      0        s  
 CZ10YT=RR    10-year   <CZ10YT=R  1.05  -0.00   +176bp    -2bps
                        R>           80     80        s  
            Poland                                              
 PL2YT=RR     2-year    <PL2YT=RR  1.56  0.001   +249bp    +0bps
                        >            60      0        s  
 PL5YT=RR     5-year    <PL5YT=RR  1.70  0.021   +265bp    +2bps
                        >            30      0        s  
 PL10YT=RR    10-year   <PL10YT=R  1.86  0.035   +257bp    +3bps
                        R>           70      0        s  
                        FORWARD    RATE  AGREE                  
                                         MENT            
                                   3x6   6x9    9x12     3M
                                                         interba
                                                         nk
            Czech Rep           <  2.08   1.90     1.73     2.14
                        PRIBOR=>                         
            Hungary             <  0.31   0.36     0.40     0.26
                        BUBOR=>                          
            Poland              <  1.72   1.67     1.60     1.72
                        WIBOR=>                          
            Note: FRA   are for ask                             
            quotes      prices                           
 
    
 (Reporting by Krisztina Than in Budapest, Jason Hovet and
Robert Muller in Prague and Alicja Ptak in Warsaw; Editing by
Toby Chopra)
  
 
 
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