October 29, 2018 / 3:31 PM / 23 days ago

CEE MARKETS-Zloty leads easing, but stocks track European rebound

    * Uncertainty over German Chancellor weakens currencies
    * Czech crown resists on central bank rate hike expectation

 (Adds deepened currency losses, new comments from market
participants)
    By Sandor Peto and Alicja Ptak
    BUDAPEST/WARSAW, Oct 29 (Reuters) - The zloty led a
weakening of Central European currencies on Monday as the euro
was also hit by uncertainty over German Chancellor Angela
Merkel's hold on her office.
    Merkel told leaders of her Christian Democrats that she will
not seek re-election as party chairwoman in December and that
her fourth term as chancellor would be her last.
    Germany is the European Union's biggest economy and a key
trading and investment partner for its eastern members.
    The region's most liquid currency, the zloty, shed
0.3 percent against the euro by 1359 GMT, while the forint eased
by 0.2 percent.
    "Germany is causing a region-wide weakening," one
Budapest-based currency dealer said, adding that he did not see
much downside in the forint however.
    End-of-month positioning may contribute to the zloty
weakness, but technical analysis shows that it is unlikely to
depreciate much further, said Mateusz Bieniek, chief dealer at
Santander Bank in Poland.
    The Czech crown gave up early gains, trading at
25.855, or 0.1 percent weaker from Friday.
    Although it was outperforming the zloty and the forint, it
was still near its weakest levels since July, even though the
Czech central bank has raised rates at its past three meetings,
taking the main two-week repo rate to 1.50 percent.
    It is widely expected to raise rates further at its meeting
on Thursday to support the crown and fight inflation.

    Central Europe's stock exchanges shrugged off the reports on
Merkel, with Warsaw's and Prague's main indices
rebounding from multi-month lows as Western European shares also
regained ground.
    Europe's auto stocks index jumped after a report
said China's regulator was planning to halve its car purchase
tax.
    In Prague, a 2.6 percent gain by state-controlled utility
CEZ was a key driver of the main stock index's 2.1
percent rise.
    The Czech government may delay its decision on building new
reactors at CEZ's two nuclear power plants, Industry
Minister Marta Novakova was quoted as saying on Monday. 
    Some minority CEZ shareholders are afraid that such an
expensive project might dent dividend payouts.
    In the region's government bond markets, Poland's 10-year
paper, boosted by a strong auction on Friday, traded
at its lowest yield since August early in the session, but later
rose to 3.14 percent, tracking a rise in Bund yields
after the reports on Merkel.
    "What we can see right now is a small correction. In the
future the yields should drowsily rise," said Mateusz Sutowicz,
a financial markets analyst at Bank Millennium. 
     
            CEE       SNAPSHOT   AT                         
            MARKETS             1559 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.8550   25.8300    -0.10%    -1.21%
 crown      >                                       
 Hungary    <EURHUF=  324.4500  323.8300    -0.19%    -4.17%
 forint     >                                       
 Polish     <EURPLN=    4.3227    4.3094    -0.31%    -3.39%
 zloty      >                                       
 Romanian   <EURRON=    4.6670    4.6610    -0.13%    +0.27%
 leu        >                                       
 Croatian   <EURHRK=    7.4310    7.4323    +0.02%    -0.01%
 kuna       >                                       
 Serbian    <EURRSD=  118.1600  118.4500    +0.25%    +0.29%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1053.13  1031.630    +2.08%    -2.32%
                                       0            
 Budapest             36202.10  35937.61    +0.74%    -8.06%
 Warsaw                2105.08   2082.77    +1.07%   -14.47%
 Bucharest             8494.46   8412.36    +0.98%    +9.55%
 Ljubljana  <.SBITOP    801.78    807.83    -0.75%    -0.57%
            >                                       
 Zagreb                1786.38   1798.00    -0.65%    -3.07%
 Belgrade   <.BELEX1    736.29    749.69    -1.79%    -3.09%
            5>                                      
 Sofia                  600.90    599.65    +0.21%   -11.30%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    1.6370    0.1640   +229bps    +15bps
            R>                                      
   5-year   <CZ5YT=R    1.8550   -0.0010   +204bps     -4bps
            R>                                      
   10-year  <CZ10YT=    2.1430   -0.0150   +175bps     -6bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.5550    0.0290   +221bps     +1bps
            R>                                      
   5-year   <PL5YT=R    2.4240    0.0450   +261bps     +1bps
            R>                                      
   10-year  <PL10YT=    3.1320    0.0080   +274bps     -4bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                2.05      2.20      2.35      1.79
            <PRIBOR=                                
            >                                       
 Hungary                  0.32      0.57      0.91      0.16
                                                    
 Poland                   1.76      1.79      1.84      1.72
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 
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