January 24, 2019 / 11:09 AM / 4 months ago

CEE MARKETS-PKN knocks Warsaw stock index off 11-month high

    * PKN Orlen shares fall knocks Warsaw index into the red
    * Initially Warsaw led moderate gains ahead of ECB meeting
    * Growth, weaker dollar drive CEE stocks higher -analysts

 (Adds retreat of Warsaw's stock index on PKN Orlen plunge, new
analyst comments)
    By Sandor Peto and Alicja Ptak
    BUDAPEST/WARSAW, Jan 24 (Reuters) - PKN Orlen
shares plunged on Thursday, after the Polish oil group reported
lower-then-expected fourth-quarter earnings, knocking Warsaw's
stock index from an 11-month high.]
    A 5 percent drop in PKN shares dragged the bluechip index
 a third of a percent below Wednesday's close by 1149
GMT. Earlier, the Polish index led cautious gains in Central
Europe's main bourses ahead of the European Central Bank's
    Prague's index reached a five-week high and retained
its 0.2 percent gain.
    Budapest's bluechip index rose by 0.4 percent, shrugging off
a one-week strike which started at the Hungarian unit of car
maker Audi for higher wages.  
    Regional currencies were mostly slightly weaker ahead of the
closely-watched ECB meeting, with the forint shedding 0.2
percent against the euro, drifting further off the 7-1/2-month
highs reached on Monday.    
    The euro zone is central Europe's main trade partner, and
the region's investors will closely watch whether the ECB
acknowledges a slowdown in economic growth in the bloc or raises
prospects of a delay in the start of rate tightening that has
been projected for the autumn.
    "One could argue that the overall message from the ECB will
not be sufficiently dovish to weigh significantly on the euro
and on the CEE currencies," Rabobank analyst Piotr Matys said in
a note.
    "That said, the market has already pushed back its
expectations for the ECB's first hike," he said, adding that if
the ECB still signals that a rate hike could come in September,
investors could interpret that as a polixy mistake and sell the
euro and Central European currencies.
    Faster growth in Central Europe's slowing, but still robust
growth helps its equities, said Zoltan Torok, analyst of Equilor
brokerage in Budapest.   
    "Developed economies like Germany and France are slowing,
but Poland's and Hungary's prospects are quite good... and that
can explain a good performance of their equities," he said.
    Marcin Gatarz, head of research at Pekao Investment Banking
in Warsaw, said the relative weakness of the dollar this year,
rather than fundamentals, was driving the gains in stocks.
    Last year a dollar rally led to capital withdrawals from
emerging markets in Central Europe and elsewhere. 
    Warsaw's stock index has been the region's top performer
this year, firming about 5.5 percent since the end of 2018. 
    Budapest's stock index, which reached a one-year high
last week, is up 4.7 percent so far this year. 
    The zloty eased a touch to 4.2941 versus the euro
as investors continued to digest Wednesday's mixed comments from
Polish rate setters.
            CEE       SNAPSHOT   AT                         
            MARKETS             1249 CET            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2019
 Czech      <EURCZK=   25.7020   25.6900    -0.05%    +0.02%
 crown      >                                       
 Hungary    <EURHUF=  318.7000  318.1500    -0.17%    +0.75%
 forint     >                                       
 Polish     <EURPLN=    4.2941    4.2915    -0.06%    -0.10%
 zloty      >                                       
 Romanian   <EURRON=    4.7685    4.7710    +0.05%    -2.40%
 leu        >                                       
 Croatian   <EURHRK=    7.4340    7.4365    +0.03%    -0.32%
 kuna       >                                       
 Serbian    <EURRSD=  118.3800  118.4600    +0.07%    -0.07%
 dinar      >                                       
 Note:      calculated from               1800 CET          
                      Latest    Previous  Daily     Change
                                close     change    in 2019
 Prague                1023.45  1021.650    +0.18%    +3.74%
 Budapest             40990.83  40818.69    +0.42%    +4.73%
 Warsaw                2399.13   2407.09    -0.33%    +5.38%
 Bucharest             7141.56   7141.56    +0.00%    -3.28%
 Ljubljana  <.SBITOP    838.91    842.67    -0.45%    +4.31%
 Zagreb                1751.73   1755.51    -0.22%    +0.17%
 Belgrade   <.BELEX1    701.00    699.05    +0.28%    -7.97%
 Sofia                  568.76    562.86    +1.05%    -4.32%
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
 Czech                                              spread
   2-year   <CZ2YT=R    1.8810    0.1310   +246bps    +13bps
   5-year   <CZ5YT=R    1.7350    0.0140   +208bps     +3bps
   10-year  <CZ10YT=    1.8630    0.0060   +166bps     +3bps
   2-year   <PL2YT=R    1.3830   -0.0140   +196bps     -2bps
   5-year   <PL5YT=R    2.1980   -0.0180   +254bps     +0bps
   10-year  <PL10YT=    2.8220   -0.0140   +262bps     +1bps
            FORWARD   RATE      AGREEMEN                    
                      3x6       6x9       9x12      3M
 Czech Rep                2.10      2.17      2.20      2.01
 Hungary                  0.29      0.55      0.81      0.14
 Poland                   1.74      1.74      1.73      1.72
 Note: FRA  are for ask prices                              

 (Reporting by Sandor Peto
Editing by John Stonestreet/Keith Weir)
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