March 7, 2018 / 10:38 AM / 13 days ago

CEE MARKETS-Assets retreat, Poland seen cutting inflation forecasts

    * FX, stocks rally fizzles out as U.S. trade war fear
    * Polish central bank seen lowering inflation forecasts

    By Sandor Peto
    BUDAPEST, March 7 (Reuters) - Most Central European
currencies and stocks retreated from the previous session's
highs on Wednesday on expectations that the Polish central bank
(NBP) would revise down its inflation forecasts at a meeting
later in the day.
    Regional currencies and stock indices had risen on Tuesday
as risk appetite returned to global markets after weeks of
decline caused by fears that inflation may rise globally.
    But by Wednesday shadows gathered again over equities and
emerging markets when a White House advocate for free trade
resigned, re-igniting concerns of a possible trade war.
    Warsaw's bluechip stock index fell 0.7 percent even
though good fourth-quarter earnings results boosted the stocks
of refiner Lotos by 1 percent.
    The zloty, the crown and the forint
 eased mildly against the euro.
    The region's main currencies were off Tuesday's highs. The
leu was slightly firmer from Tuesday's close after
Romania reported a 6.9 percent surge in economic output in the
last quarter of 2017 compared to a year earlier.
    At 4.6607 versus the euro, the leu remained near the record
lows reached in December over fears of economic overheating.
    Romanian consumption surged by 9.3 percent in the fourth
quarter. A catch-up process in wages across the region with
richer Western Europe is a key driver of growth.
    This has triggered inflation concerns in Romania and also in
the Czech Republic, where the central bank started to reverse
earlier interest rate cuts last year.
    But Polish inflation has retreated in the past months.
    The central bank is expected to cut its inflation forecasts
on Wednesday, after lifting them in November. Governor Adam
Glapinski has previously said he saw no reason to hike rates at
least until the first quarter of 2019, and analysts believe he
may reiterate this message on Wednesday.
    The prospect of the inflation forecast being revised lower
keeps a lid on the zloty, they said.
    "The outcome of the MPC (Monetary Policy Council) meeting
should not have much impact on the long end of the Polish IRS
and bond curves that are likely to be driven by trends on the
core market," BZ WBK analysts said in a note.
    Elsewhere, Budapest's main equities index bucked the
regional fall, rising by 0.4 percent, driven by an almost 3
percent surge in oil group MOL shares which continued
to recover from seven-month lows hit on Friday. 
    A Reuters poll published on Wednesday showed that analysts
expect the Czech crown and the forint to firm more than 2
percent against the euro in the coming year. [nL5N1QO4PM[ 
            CEE       SNAPSHOT   AT                         
            MARKETS             0958 CET            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.4020   25.4000    -0.01%    +0.55%
 crown      >                                       
 Hungary    <EURHUF=  312.8500  312.7200    -0.04%    -0.62%
 forint     >                                       
 Polish     <EURPLN=    4.1882    4.1875    -0.02%    -0.28%
 zloty      >                                       
 Romanian   <EURRON=    4.6607    4.6640    +0.07%    +0.41%
 leu        >                                       
 Croatian   <EURHRK=    7.4260    7.4275    +0.02%    +0.06%
 kuna       >                                       
 Serbian    <EURRSD=  117.9500  118.0600    +0.09%    +0.47%
 dinar      >                                       
 Note:      calculated from               1800 CET          
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1115.93  1120.960    -0.45%    +3.50%
 Budapest             38145.88  38008.47    +0.36%    -3.13%
 Warsaw                2322.77   2339.51    -0.72%    -5.62%
 Bucharest             8422.40   8432.84    -0.12%    +8.62%
 Ljubljana  <.SBITOP    807.96    810.46    -0.31%    +0.20%
 Zagreb                1849.08   1846.35    +0.15%    +0.34%
 Belgrade   <.BELEX1    747.30    748.01    -0.09%    -1.65%
 Sofia                  685.54    681.67    +0.57%    +1.19%
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
 Czech                                              spread
   2-year   <CZ2YT=R    0.8960    0.0340   +144bps     +4bps
   5-year   <CZ5YT=R    1.3060    0.0400   +126bps     +4bps
   10-year  <CZ10YT=    1.9680    0.0140   +129bps     +1bps
   2-year   <PL2YT=R    1.6250   -0.0070   +217bps     +0bps
   5-year   <PL5YT=R    2.5750   -0.0010   +253bps     +0bps
   10-year  <PL10YT=    3.3290    0.0000   +265bps     +0bps
            FORWARD   RATE      AGREEMEN                    
                      3x6       6x9       9x12      3M
 Czech Rep                0.97      1.09      1.24      0.91
 Hungary                  0.07      0.10      0.18      0.02
 Poland                   1.74      1.77      1.84      1.72
 Note: FRA  are for ask prices                              
0 : 0
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