February 26, 2020 / 11:04 AM / a month ago

CEE MARKETS-Stocks slide on coronavirus worries, forint nears record lows

    By Anita Komuves
    BUDAPEST, Feb 26 (Reuters) - Central European stock markets
and currencies extended losses on Wednesday as deepening worries
about the new coronavirus put pressure on global markets. 
    The main stock indexes in Prague and Bucharest led losses,
with both down more than 2% by 0955 GMT. Budapest lost 1.7% and
Warsaw was down 1%. 
    Currencies also weakened, with the Hungarian forint losing
0.3% and trading at 339.55, nearing the record low of 340.40
which it hit earlier this month. 
    The Czech crown was down 0.3% at 25.315 to the euro, the
weakest since Jan. 6. The zloty lost 0.14% against the euro and
the Romanian leu was stable at 4.8105 to the euro. 
    News about the coronavirus and the plunge in stock markets
is the reason why currencies are weakening, dealers in Budapest
    "Markets have started to beat all regional currencies, the
Hungarian forint is not an outlier. However, its downward
trajectory is steep," one dealer said. "The changes in the tone
of the central bank's comments yesterday should have had a
positive effect on the strength of the forint, but in this
situation it did not."  
    The NBH left interest rates unchanged on Tuesday, as
expected, and pledged to use all its tools to reach its
inflation target if a lasting change in the outlook warrants
policy action.
    The jump in headline inflation in January to 4.7%
year-on-year and a plunge in the forint to record lows versus
the euro led the NBH earlier this month to signal that it would
use all available tools if needed to fight high inflation.
    "The bank only said what it has already communicated, and
pushed the decision to next month. This might have pushed the
forint lower a bit, but it was not significant," another
Budapest-based dealer said. He added that coronavirus worries
could push the forint to its record low of 340 forints to the
euro again.
    It is still uncertain how concerns that there could be a
global pandemic will affect bond yields in central Europe.
Though news about the coronavirus has not moved bond yields in
Hungary, they are reacting to local news, two dealers in
Budapest said. 
    "Investors are cautious, waiting to see if interbank rates
move a little higher following the NBH's comments on Tuesday
that suggested that there might be a rate hike in March," a
fixed income dealer said.  
    "Money might be fleeing stock markets now, which will push
bond yields down," another dealer said. 
    The Czech government is holding bond auctions later on
    "Given current circumstances in financial markets and
prevailing flight to havens mood amid investors we expect solid
demand today," Frantisek Kanka of Komercni Banka in Prague said
in a note. 
    Romania's longer-term government bonds fell sharply on
Tuesday, a day after the country's top court overturned the
re-nomination of ousted Liberal Party leader Ludovic Orban as
prime minister by President Klaus Iohannis.
    The move looks set to prolong the country's political
turmoil. Earlier this month, lawmakers toppled Orban's
three-month-old minority government after a confidence vote by
the Social Democrats (PSD) opposition. 
            CEE        SNAPSHOT    AT                         
            MARKETS               1055 CET            
                       Latest     Previous  Daily     Change
                       bid        close     change    in 2020
 Czech                   25.3150   25.2400    -0.30%    +0.46%
 Hungary                339.5500  338.5000    -0.31%    -2.48%
 Polish                   4.3074    4.3012    -0.14%    -1.18%
 Romanian                 4.8105    4.8092    -0.03%    -0.46%
 Croatian                 7.4600    7.4540    -0.08%    -0.20%
 Serbian                117.5100  117.5500    +0.03%    +0.05%
 Note:      calculated from                 1800 CET          
                       Latest     Previous  Daily     Change
                                  close     change    in 2020
 Prague                  1016.85  1041.440    -2.36%    -8.85%
 Budapest               42330.72  43075.07    -1.73%    -8.14%
 Warsaw                  1925.55   1945.71    -1.04%   -10.44%
 Bucharest               9564.19   9779.14    -2.20%    -4.14%
 Ljubljana                903.99    921.04    -1.85%    -2.36%
 Zagreb                  1893.46   1896.02    -0.14%    -6.14%
 Belgrade   <.BELEX15     811.15    809.42    +0.21%    +1.18%
 Sofia                    541.86    545.01    -0.58%    -4.63%
                       Yield      Yield     Spread    Daily
                       (bid)      change    vs Bund   change
 Czech                                                spread
   2-year   <CZ2YT=RR     1.7810    0.0530   +249bps     +8bps
   5-year   <CZ5YT=RR     1.5110   -0.0340   +222bps     -1bps
   10-year  <CZ10YT=R     1.4150   -0.0050   +193bps     +0bps
   2-year   <PL2YT=RR     1.4930    0.0030   +221bps     +3bps
   5-year   <PL5YT=RR     1.6320    0.0000   +234bps     +2bps
   10-year  <PL10YT=R     1.8750   -0.0240   +239bps     -2bps
                       3x6        6x9       9x12      3M
 Czech Rep          <       2.37      2.28      2.15      2.39
 Hungary            <       0.75      0.88      0.97      0.60
 Poland             <       1.71      1.66      1.60      1.71
 Note: FRA  are for ask prices                                
 (Additional reporting by Robert Muller in Prague, Editing by
Timothy Heritage)
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