May 7, 2019 / 2:16 PM / a month ago

CEE MARKETS-Currencies, stocks fall after EU cuts euro zone growth forecasts

    * Forint leads FX losses as Brussels cuts euro zone GDP
forecasts
    * Forint vulnerable ahead of possible rise in April CPI
    * Equities track decline in Western European stock markets

 (Recasts with European Commission forecasts, increased losses
in forint and CEE stock markets)
    By Sandor Peto
    BUDAPEST, May 7 (Reuters) - Central European currencies and
stocks eased on Tuesday after the European Commission cut its
forecasts for growth in the euro zone.
    An escalation in trade tensions between the United States
and China had already soured sentiment in global markets,
weighing on asset prices in emerging economies.
    Hungary's forint led a weakening of currencies in
the European Union's eastern countries, losing 0.2 percent
versus the euro by 1315 GMT to trade at 324.3. The zloty
 and the leu eased by 0.1 percent.
    One Budapest-based dealer said the forint could easily
weaken through last week's 5-month lows of 324.85 towards 325 or
326.
    The currency extended early losses after the European
Commission cut its forecasts for economic growth in the euro
zone to 1.2 percent for this year and 1.5 percent next year.

    "The weak data suggest that the European Central Bank may
not need to tighten its policy," the dealer said.
    Loose euro zone monetary policy could prevent the National
Bank of Hungary (NBH) from tightening its own conditions despite
rising inflation, fuelling worries over its credibility, market
participants said.
    Hungary is due to release April inflation figures on
Thursday, with some analysts expecting the annual rate to reach
the top of the central bank's 2-4 percent target range from 3.7
percent in March.
    "In the euro zone, there is no inflation pressure, but in
Hungary, there is," the dealer said.
    A Reuters poll of analysts conducted last week showed that
monetary tightening in response to rising inflation was seen 
helping the forint and the Czech crown to strengthen in the
coming year.   
    The region's main equity indexes mostly mirrored falls in
London and Frankfurt.
    Warsaw led the way lower with its bluechip index
down 1.2 percent to its lowest level since early January.
    Shares of Alior rose 2.3 percent and reversed some
of Monday's losses after the bank reported first-quarter profits
in line with forecasts.
    But most shares declined, including PGE, which fell
5.5 percent, and JSW, which was down 7.1 percent. 
    State-run power utility PGE reported a fall in first-quarter
earnings, while state-run coal producer JSW's stocks plunged
after ArcelorMittal Poland said on Monday it planned to halt its
blast furnace and steel plant in Krakow in September.    

    JSW's shares fell even though ArcelorMittal said its
purchases from the company should remain stable.
    Polish government bond yields tracked a drop in Bund yields.
The 10-year Polish yield dropped 3 basis points to
2.969 percent, while Hungary fixed its corresponding yield
 higher by 1 basis point at 3.32 percent.
    
            CEE       SNAPSHOT   AT                         
            MARKETS             1516 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2019
 Czech      <EURCZK=   25.7300   25.7270    -0.01%    -0.09%
 crown      >                                       
 Hungary    <EURHUF=  324.3000  323.7200    -0.18%    -0.99%
 forint     >                                       
 Polish     <EURPLN=    4.2862    4.2834    -0.07%    +0.08%
 zloty      >                                       
 Romanian   <EURRON=    4.7585    4.7547    -0.08%    -2.20%
 leu        >                                       
 Croatian   <EURHRK=    7.4100    7.4115    +0.02%    +0.00%
 kuna       >                                       
 Serbian    <EURRSD=  117.9000  117.9500    +0.04%    +0.34%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2019
 Prague                1065.40  1064.710    +0.06%    +7.99%
                                       0            
 Budapest             41241.44  41547.35    -0.74%    +5.37%
 Warsaw                2261.92   2290.13    -1.23%    -0.65%
 Bucharest             8422.73   8380.61    +0.50%   +14.07%
 Ljubljana  <.SBITOP    881.04    880.66    +0.04%    +9.55%
            >                                       
 Zagreb                1835.71   1827.45    +0.45%    +4.97%
 Belgrade   <.BELEX1    736.38    742.64    -0.84%    -3.32%
            5>                                      
 Sofia                  568.19    571.30    -0.54%    -4.42%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    1.7700   -0.0080   +239bps     +1bps
            R>                                      
   5-year   <CZ5YT=R    1.8150   -0.0110   +227bps     +2bps
            R>                                      
   10-year  <CZ10YT=    1.8770   -0.0040   +191bps     +4bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.6950   -0.0100   +231bps     +1bps
            R>                                      
   5-year   <PL5YT=R    2.3280   -0.0310   +279bps     +0bps
            R>                                      
   10-year  <PL10YT=    2.9890   -0.0350   +302bps     +1bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                2.26      2.27      2.28      2.21
            <PRIBOR=                                
            >                                       
 Hungary                  0.34      0.52      0.70      0.16
                                                    
 Poland                   1.75      1.76      1.79      1.72
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
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 (Reporting by Sandor Peto
Editing by Kirsten Donovan)
  
 
 
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