November 7, 2017 / 10:23 AM / in 12 days

CEE MARKETS-Leu eases, Romanian central bank hawks seen still weak

    * Leu eases ahead of Romanian central bank meeting
    * Romanian bank may cool rate hike expectations-analysts
    * Polish bank stocks surge on Q3 results, rate hike hopes
    * Small-cap stocks put Budapest index on rollercoaster

    By Sandor Peto
    BUDAPEST/BUCHAREST, Nov 7 (Reuters) - The leu eased on
Tuesday while other Central European currencies were mixed ahead
of a meeting of the Romanian central bank that is expected to
deliver a relatively dovish message.
    The latest meetings of the European Central Bank and then
the Czech central bank surprised many people by giving
less-hawkish-than-expected guidance, even though the latter
increased its key rate last week for the second time in three
months.
    Romania may also try to curb expectations for rate hikes,
some analysts said.
    Seven out of nine analysts in a Reuters poll projected that
its main rate will stay 1.75 percent and only two forecast a 25
basis point hike to fight increasing inflation pressures in the
robustly growing economy.
    "We anticipate a dovish tightening by the central bank with
the narrowing of the standing facilities corridor being widely
expected but we see a more cautious message from the central
bank to trim some aggressive rate hike expectations for 2018,"
ING analysts said in a note.
    "A dovish tightening from the central bank today could offer
more support for Romanian government bonds," they added.
    The leu eased 0.1 percent to 4.5974 against the
euro by 1000 GMT. Romanian bond yields mostly dropped mildly
according to Reuters data, while Polish yields edged up.
    The Polish central bank is also seen holding fire at its
meeting on Wednesday but it is expected to start to increase
interest rates by late next year.
    Expectations for higher rates contributed to a rally of
Polish banking sector shares.
    The Warsaw bourse's banking sector index reached its
highest levels since May 2015, before the conservative Law and
Justice party came to power in late 2015 and knocked down bank
stocks with some of its measures and policy pledges.
    Good third-quarter results, including a rise in credit
volumes, from Polish banks, particularly Bank Millennium
 and MBank, help stocks in the sector, said
Grzegorz Skowronski, trader of Wood&Company.
    "It seems that the economic rebound translates into a rise
of demand for credits and helps banks' results," he said. 
    "Also it seems that there are more hawkish voices in the MPC
(central bank Monetary Policy Council), and one can not rule out
that the MPC may start to talk about rate rises next year,
despite earlier denials," he added.
    Budapest's main equities index briefly hit a record
high, boosted by a rally of small-cap firms controlled by Lorinc
Meszaros, a tycoon close to the government.
    Appeninn and Opus initially rose by
about 15 percent and later plunged and traded by over 10 percent
lower from Monday.
    "These are highly speculative papers," one Budapest-based
trader said.
    
               CEE MARKETS  SNAPSH   AT  1100 CET         
                            OT                      
                            CURRENCIES                    
                            Latest  Previo  Daily   Change
                                    us              
                            bid     close   change  in
                                                    2017
 Czech crown                25.570  25.563  -0.03%   5.62%
                                 0       5          
 Hungary                    311.05  311.38   +0.11  -0.72%
 forint                         00      50       %  
 Polish zloty               4.2400  4.2414   +0.03   3.87%
                                                 %  
 Romanian leu               4.5970  4.5913  -0.12%  -1.35%
 Croatian                   7.5410  7.5378  -0.04%   0.19%
 kuna                                               
 Serbian                    118.46  118.52   +0.05   4.13%
 dinar                          00      00       %  
 Note: daily   calculated   previo  close   1800          
 change        from         us      at      CET     
                            STOCKS                        
                            Latest  Previo  Daily   Change
                                    us              
                                    close   change  in
                                                    2017
 Prague                     1054.5  1055.5  -0.09%   +14.4
                                 9       6              3%
 Budapest                   40120.  40115.   +0.01   +25.3
                                83      77       %      7%
 Warsaw                     2563.7  2515.3   +1.92   +31.6
                                 2       4       %      1%
 Bucharest                  7774.3  7784.0  -0.12%   +9.73
                                 9       5               %
 Ljubljana                  787.47  788.85  -0.17%   +9.74
                                                         %
 Zagreb                     1808.5  1815.7  -0.39%  -9.34%
                                 8       0          
 Belgrade                   731.08  729.65   +0.20   +1.91
                                                 %       %
 Sofia                      670.58  672.79  -0.33%   +14.3
                                                        5%
                            BONDS                         
                            Yield   Yield   Spread  Daily
                            (bid)   change  vs      change
                                            Bund    in
 Czech                                              spread
 Republic                                           
   2-year                    0.408   0.104   +116b   +10bp
                                                ps       s
   5-year                    0.673  -0.045   +104b   -5bps
                                                ps  
   10-year                   1.552  -0.046   +120b   -6bps
                                                ps  
 Poland                                                   
   2-year                     1.62  -0.002   +238b   -1bps
                                                ps  
   5-year                    2.685   0.004   +305b   +0bps
                                                ps  
   10-year                   3.452   0.013   +310b   +0bps
                                                ps  
               FORWARD      RATE    AGREEMENT             
                            3x6     6x9     9x12    3M
                                                    interb
                                                    ank
 Czech Rep             <PR    0.93    1.06    1.19       0
               IBOR=>                               
 Hungary               <BU    0.07    0.08    0.13    0.03
               BOR=>                                
 Poland                <WI    1.79    1.85   1.925    1.73
               BOR=>                                
 Note: FRA     are for ask                                
 quotes        prices                               
 *********************************************************
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 (Additional reporting by Bartosz Chmielewski in Warsaw; Editing
by Matthew Mpoke Bigg)
  
 
 

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