January 16, 2018 / 12:29 PM / a month ago

CEE MARKETS-Leu falls after PM quits, CEE stocks set multi-year highs

    * Leu nears record low after PM resignation
    * Leu, Romanian stocks rebound as ruling party proposes new
PM
    * German stocks rally helps Prague, Warsaw hit multi-year
highs
    * Czech PM Babis loses confidence vote, but seen staying

 (Adds Romanian PM candidate, Czech confidence vote, central
bankers)
    By Sandor Peto and Luiza Ilie
    BUDAPEST/BUCHAREST, Jan 16 (Reuters) - Romanian assets
rebounded from a plunge on Tuesday as the ruling Social Democrat
party (PSD) quickly picked a candidate to replace prime minister
Mihai Tudose, who resigned on Monday.
    The move reduces the odds of a drawn-out political crisis,
but does not eliminate them as President Klaus Iohannis is not
certain to accept the candidate, Member of the European
Parliament Viorica Dancila.
    Iohannis appointed Defence Minister Mihai Fifor as interim
prime minister, prompting speculation that he was Iohannis's
preferred candidate for premier.
    Tudose was forced to quit after a row with Liviu Dragnea,
the powerful leader of the party, which has been racked by
corruption scandals.
    The leu traded at 4.6535 against the euro at 1522,
still down 0.3 percent, but off the day's low of 4.6635,
drifting away from its end-2017 record low of 4.68.
    Bucharest's main index, which had hit 4-1/2-month
highs in the previous two sessions, slipped 0.26 percent.
    Other bourses in Central Europe hit or tested multi-year
highs, pulled up by optimism over the region's economies, gains
in equities in Germany and a positive mood in emerging
markets.
    Warsaw's blue-chip index hit its highest levels
since late 2013. It rose by 1.7 percent, with Poland's biggest
bank, PKO BP ,leading the rally.
    PKO shares were at their highest in almost seven years.
    Czech stocks set a 6-1/2-year high, boosted by strong
economic growth, even though Prime Minister Andrej Babis's
minority government lost a parliamentary vote of confidence.
    The defeat had been expected and opens a possibly lengthy
period of talks to form a new government.
    Czech central bank (CNB) board member Vojtech Benda said
inflation risks to the CNB's latest forecasts had risen slightly
and might allow faster interest rate rises than the bank's
outlook foresees.
    The CNB has increased its interest rates twice since August.
    The crown firmed 0.2 percent against the euro to
25.48.
    Romania's central bank delivered its first interest rate
hike in a decade last week, but inflation is soon expected to
rise above 3.5 percent, the top of its target range.
    Deputy Governor Liviu Voinea said the bank was confident
that the current level of the leu was very close to the level
suggested by the economy's fundamentals. 
    
            CEE       SNAPSHOT   AT                         
            MARKETS             1622 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.4800   25.5250    +0.18%    +0.24%
 crown      >                                       
 Hungary    <EURHUF=  308.5900  308.9300    +0.11%    +0.75%
 forint     >                                       
 Polish     <EURPLN=    4.1725    4.1765    +0.10%    +0.09%
 zloty      >                                       
 Romanian   <EURRON=    4.6535    4.6385    -0.32%    +0.56%
 leu        >                                       
 Croatian   <EURHRK=    7.4240    7.4325    +0.11%    +0.08%
 kuna       >                                       
 Serbian    <EURRSD=  118.2900  118.1900    -0.08%    +0.18%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1113.28  1109.090    +0.38%    +3.26%
                                       0            
 Budapest             39670.80  39579.11    +0.23%    +0.75%
 Warsaw                2586.49   2542.65    +1.72%    +5.09%
 Bucharest             8240.06   8254.85    -0.18%    +6.27%
 Ljubljana  <.SBITOP    822.05    828.40    -0.77%    +1.94%
            >                                       
 Zagreb                1879.60   1870.76    +0.47%    +1.99%
 Belgrade   <.BELEX1    774.65    768.01    +0.86%    +1.95%
            5>                                      
 Sofia                  715.40    714.31    +0.15%    +5.60%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    0.6500    0.0170   +123bps     +2bps
            R>                                      
   5-year   <CZ5YT=R    0.8990   -0.0520   +103bps     -4bps
            R>                                      
   10-year  <CZ10YT=    1.7410    0.0000   +118bps     +3bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.6070   -0.0040   +219bps     +0bps
            R>                                      
   5-year   <PL5YT=R    2.5880   -0.0280   +272bps     -1bps
            R>                                      
   10-year  <PL10YT=    3.2790   -0.0190   +272bps     +1bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                1.04      1.21      1.36      0.76
            <PRIBOR=                                
            >                                       
 Hungary                  0.10      0.18      0.26      0.02
                                                    
 Poland                   1.75      1.77      1.86      1.72
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 *************************************************          
 *************                                      
    

 (Additional reporting by Radu Marinas in Bucharest/Bartosz
Chmielewski in Warsaw; Editing by Raissa Kasolowsky, William
Maclean)
  
 
 
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