May 29, 2018 / 9:28 AM / a month ago

CEE MARKETS-Bank stocks, currencies ease on Italy, dollar rally

    * Hungary leads currency, stocks fall in region
    * Euro zone risks from Italian politics lead to risk
aversion
    * OTP Bank slide knocks Budapest's stock index to one-year
low

    By Sandor Peto
    BUDAPEST, May 29 (Reuters) - Central European currencies,
banks stocks and Polish government bonds eased on Tuesday as
Italy's and Spain's political turmoil and the dollar's extended
gains weighed on sentiment.
    The forint led a weakening of currencies, shedding
0.4 percent to 319.97 against the euro by 0913 GMT, the Czech
crown shed 0.3 percent to 25.816 and the zloty
 eased 0.1 percent to 4.3062.
    The region's most liquid currencies are still near
multi-month lows reached this month as a rally of the dollar and
U.S. debt yields caused selling in emerging markets.
    The pressure was not as big as earlier this month as the
10-year U.S. Treasury yield continued to decline, retreating
from levels above 3 percent, traders said.
    But European markets are pricing in new negative factors,
political uncertainty in Italy, and also Spain, which also
affects sentiment in the European Union's emerging markets.
    "The fresh factor which markets have to price in now is
Italy," one Budapest-based currency dealer said, adding that the
forint could firm if international markets calm down.
    Investors fear that Italy is drifting towards tension with
euro zone partners even though the president blocked formation
of a eurosceptic government at the week-end.
    The concerns hit bank stocks which have a big weight in
national stock indices in Central Europe.
    Austrian-based regional banks Erste and Raiffeisen
 eased 6.1 and 3.4 percent in Vienna, with Erste
leading a 1.4 percent fall in the Prague bourse where its is
also listed.
    Warsaw-listed bank shares also fell 1.4 percent.
    Budapest's main index hit a one-year low, knocked
down by OTP Bank whose shares fell further by 2.6
percent after crossing the 10,000 forints psychological level on
Monday. 
    Hungarian government bonds, which were worst hit in the
region's debt markets by this month's emerging markets sell-off,
were steady, outperforming Poland where the 10-year bond yield
rose 7 basis points to 3.27.
    "The possible impacts of the problems in the euro zone
peripheries is unclear at this initial stage," one
Budapest-based fixed income trader said, adding that regional
debt markets may even benefit if bonds are sold in the southern
euro zone.
    Hungary's government is expected to submit on Tuesday a bill
to parliament which would introduce criminal penalties for
non-governmental organisations that the government says support
and  finance illegal immigration -- legislation which could
cause tension with European Union partners.
    But domestic politics, including a demonstration planned in
Prague for this evening against Czech Prime Minister Andrej
Babis are not in the focus of attention right now, dealers said.
   
            CEE       SNAPSHOT   AT                         
            MARKETS             1113 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.8160   25.7500    -0.26%    -1.06%
 crown      >                                       
 Hungary    <EURHUF=  319.9700  318.6200    -0.42%    -2.83%
 forint     >                                       
 Polish     <EURPLN=    4.3062    4.3001    -0.14%    -3.02%
 zloty      >                                       
 Romanian   <EURRON=    4.6397    4.6361    -0.08%    +0.86%
 leu        >                                       
 Croatian   <EURHRK=    7.3900    7.3940    +0.05%    +0.55%
 kuna       >                                       
 Serbian    <EURRSD=  118.0100  118.0900    +0.07%    +0.42%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1073.35  1088.800    -1.42%    -0.45%
                                       0            
 Budapest             34686.99  35373.59    -1.94%   -11.91%
 Warsaw                2163.77   2217.87    -2.44%   -12.09%
 Bucharest             8251.73   8263.10    -0.14%    +6.42%
 Ljubljana  <.SBITOP    901.19    903.35    -0.24%   +11.76%
            >                                       
 Zagreb                1853.02   1855.58    -0.14%    +0.55%
 Belgrade   <.BELEX1    741.57    744.43    -0.38%    -2.40%
            5>                                      
 Sofia                  635.00    639.30    -0.67%    -6.27%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    0.9290    0.0590   +175bps    +17bps
            R>                                      
   5-year   <CZ5YT=R    1.4040   -0.0030   +180bps    +10bps
            R>                                      
   10-year  <CZ10YT=    1.9480   -0.0220   +170bps     +7bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.5860    0.0010   +241bps    +12bps
            R>                                      
   5-year   <PL5YT=R    2.5120    0.0810   +290bps    +19bps
            R>                                      
   10-year  <PL10YT=    3.2940    0.0830   +305bps    +18bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                1.03      1.17      1.28      0.91
            <PRIBOR=                                
            >                                       
 Hungary                  0.20      0.29      0.39      0.12
                                                    
 Poland                   1.74      1.77      1.82      1.70
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 
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