May 4, 2020 / 10:18 AM / a month ago

CEE MARKETS-Stocks drop on U.S.-China tensions, PMI shows economies in freefall in April

    By Anita Komuves
    BUDAPEST, May 4 (Reuters) - Central European stock markets
fell on Monday as global markets avoided risk after U.S.-China
tensions flared up, while fresh PMI data in the region showed a
dismal picture about the economic damage from the novel
coronavirus pandemic.
    April PMI data in Central Europe showed the effects of
lockdowns on regional economies, with the indices well below the
50-point mark that divides expansions from contractions in
    Czech factory activity dropped to 35.1 in April from 41.3 in
March, to the lowest level since March 2009. In
Poland the IHS Markit PMI for manufacturing fell to 31.9 from
March's 42.4, the lowest since the survey started in June 1998.

    "The market is a little bit still soaking in the bad PMI," a
currency dealer in Prague said. 
     Regional stock markets gave up some of last week's gains
that were fuelled by plans to gradually open economies, as
tensions between China and the US strengthened, putting
investors on the edge again. 
    U.S. Secretary of State Mike Pompeo said on Sunday there was
"a significant amount of evidence" that the virus emerged from a
laboratory in the central Chinese city of Wuhan.
    Budapest's stock index was down 1% by 0739 GMT and
Warsaw lost more than 2%. Bucharest's blue chip
index slid 0.1%. 
    Most currencies in the CEE region rose on Monday, with the
Hungarian forint leading gains, up 0.41% on the day
and trading at 352.72 versus the euro.
    "The market is now in this band between 350 and 360 versus
the euro, and the upper level is protected by the central bank,"
a trader in Budapest said.
    "I do not expect big moves in the exchange rate because now
the NBH can react immediately with its new tools and that keeps
speculators at bay," he added. 
    Action by the National Bank of Hungary in April has helped
the forint rebound from a record low near 370 to the euro. 
    The NBH introduced a new one-week deposit tool for banks at
0.9% at the start of the month. The bank can raise the 0.9% rate
if market conditions justify it, the bank's deputy governor said
earlier in April. 
    The bank is also launching a bond-buying programme as it
tries to balance giving the economy a boost and preventing a
sell-off in the currency, which has been the most vulnerable to
investor mood in the region in recent years.
    Hungary's seasonally adjusted PMI rose to 33.6 in April from
an historic low of 29.1 in March, still below the 50-point mark.
According to a Reuters poll of analysts, the Hungarian economy
is expected to shrink by about 4% this year. The government is
expected to revise its own 3% recession forecast soon.

            CEE        SNAPSHOT    AT                         
            MARKETS               0939 CET            
                       Latest     Previous  Daily     Change
                       bid        close     change    in 2020
 Czech                   27.1780   27.2250    +0.17%    -6.42%
 Hungary                352.7200  354.1500    +0.41%    -6.12%
 Polish                   4.5600    4.5618    +0.04%    -6.66%
 Romanian                 4.8400    4.8370    -0.06%    -1.07%
 Croatian                 7.5717    7.5758    +0.05%    -1.67%
 Serbian                117.5200  117.5800    +0.05%    +0.04%
 Note:      calculated from                 1800 CET          
                       Latest     Previous  Daily     Change
                                  close     change    in 2020
 Budapest               34819.20  35180.90    -1.03%   -24.44%
 Warsaw                  1613.71   1648.68    -2.12%   -24.95%
 Bucharest               7970.53   7978.64    -0.10%   -20.11%
 Ljubljana                801.06    801.85    -0.10%   -13.48%
 Zagreb                  1537.04   1544.30    -0.47%   -23.81%
 Belgrade   <.BELEX15     655.41    655.41    +0.00%   -18.25%
 Sofia                    447.45    447.45    +0.00%   -21.24%
                       Yield      Yield     Spread    Daily
                       (bid)      change    vs Bund   change
 Czech                                                spread
   2-year   <CZ2YT=RR     0.5210   -0.1310   +129bps    -12bps
   5-year   <CZ5YT=RR     0.8460   -0.0630   +160bps     -7bps
   10-year  <CZ10YT=R     1.3120    0.0300   +187bps     +0bps
   2-year   <PL2YT=RR     0.5750   -0.0120   +135bps     +0bps
   5-year   <PL5YT=RR     1.0420    0.0600   +180bps     +6bps
   10-year  <PL10YT=R     1.5020    0.0380   +206bps     +1bps
                       3x6        6x9       9x12      3M
 Czech Rep          <       0.30      0.29      0.33      0.90
 Hungary            <       1.18      1.12      1.09      1.09
 Poland             <       0.22      0.22      0.22      0.68
 Note: FRA  are for ask prices                                

 (Additional reporting by Jason Hovet in Prague, editing by
Larry King)
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