January 25, 2018 / 10:33 AM / a year ago

CEE MARKETS-Fx, stocks ease as ECB seen trying to talk down euro

    * Zloty hits multi-year highs vs euro and dollar, retreats
    * Flows into dollar may weigh on CEE fx if ECB talks down
euro
    * Hungarian bond yields drop after rises, ECB watched
    * PKN Orlen Q4 earnings report pushes Warsaw stock index
lower

    By Sandor Peto
    BUDAPEST, Jan 25 (Reuters) - Central European currencies and
stocks eased and government bonds firmed on Thursday ahead of
the European Central Bank (ECB) meeting where many investors
expect it to try to talk down the surging euro.
    Hungarian government bond yields, after jitters due to a
disappointing central bank interest rate swap tender a week ago,
dropped 3-4 basis points from Wednesday's fixing.
    The curve got slightly steeper, with 10-year papers trading
at 2.11 percent, one Budapest-based fixed income trader said.
    "The ECB will be dovish, at least right now that is the
general expectation," the trader said.
    "If not, Bund yields can go up, and the correlation (in the
region's markets) with them re-emerge," the trader added.
    The region's currencies have tracked the euro's surge to
3-year highs against the dollar this week.
    Attention on how the ECB handles the impact on euro zone
foreign trade from the euro's current strength increased after
U.S. Treasury Secretary Steven Mnuchin said a weaker dollar was
"good for us".
    Regarding exports, the euro/dollar rate has less
importance to Central European states which trade mainly trade
with the euro zone.
    But global flows in and from the dollar often influence
their currencies.
    The region's four main currencies -- the crown, the forint,
the leu and the zloty -- all eased slightly against the euro,
led by the Hungarian unit, which shed 0.2 percent by
0845 GMT.
    But all of them stand slightly firmer from the end of 2017.
    The zloty touched a 2-and-1/2-year high against the euro and
a new 3-year high versus the dollar early on Thursday, and
stands.
    It has gained by over 20 percent against the greenback since
the end of 2016 and its strengthening made its stocks a
lucrative investments for dollar investors.
    Polis stocks became last year's top performer in the MSCI
indices, beaten only by Austria which is in the same region.
    Austria is a developed market, while the region's other
states are classified as emerging markets, but the surge of
Vienna equities was fuelled by a rise of banks active in Central
Europe, similar to the Warsaw bourse.
    Regional stock exchanges, after a continuing surge since the
end of 2017, dropped on Thursday, led by 0.6 percent decline in
Prague.
    Warsaw's bluechip index shed 0.4 percent, driven by
a 3 percent fall in PKN Orlen shares, after the oil
group reported a fall in fourth-quarter profits.   
   
            CEE       SNAPSHOT   AT                         
            MARKETS             1045 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.4050   25.3740    -0.12%    +0.54%
 crown      >                                       
 Hungary    <EURHUF=  309.5500  309.0500    -0.16%    +0.44%
 forint     >                                       
 Polish     <EURPLN=    4.1525    4.1510    -0.04%    +0.57%
 zloty      >                                       
 Romanian   <EURRON=    4.6670    4.6640    -0.06%    +0.27%
 leu        >                                       
 Croatian   <EURHRK=    7.4340    7.4325    -0.02%    -0.05%
 kuna       >                                       
 Serbian    <EURRSD=  118.6200  118.7500    +0.11%    -0.10%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1131.45  1138.570    -0.63%    +4.94%
                                       0            
 Budapest             40739.62  40979.77    -0.59%    +3.46%
 Warsaw                2610.59   2621.59    -0.42%    +6.07%
 Bucharest             8419.27   8436.41    -0.20%    +8.58%
 Ljubljana  <.SBITOP    832.55    830.50    +0.25%    +3.25%
            >                                       
 Zagreb                1869.18   1871.98    -0.15%    +1.43%
 Belgrade   <.BELEX1    774.96    776.42    -0.19%    +2.00%
            5>                                      
 Sofia                  707.09    706.89    +0.03%    +4.38%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    0.5330    0.0350   +112bps     +3bps
            R>                                      
   5-year   <CZ5YT=R    1.0230   -0.0060   +113bps     -2bps
            R>                                      
   10-year  <CZ10YT=    1.7980    0.0010   +121bps     +0bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.5530   -0.0030   +214bps     -1bps
            R>                                      
   5-year   <PL5YT=R    2.6740   -0.0040   +279bps     -1bps
            R>                                      
   10-year  <PL10YT=    3.3500    0.0050   +276bps     +1bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                1.02      1.18      1.33      0.77
            <PRIBOR=                                
            >                                       
 Hungary                  0.08      0.12      0.19      0.02
                                                    
 Poland                   1.75      1.78      1.86      1.72
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 
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