November 5, 2018 / 4:00 PM / 10 days ago

CEE MARKETS-Corporate earnings hopes lift markets; Czech bonds ease

    * Budapest and Warsaw pick up on corporate results
expectations 
    * Hungary Oct PMIs jump in contrast with Czech and Polish
numbers
    * Romanian central bank not seen under pressure to raise
rates

 (Recasts, adds PKO, Romanian bond auction, quotes and Czech
bonds)
    By Sandor Peto and Alicja Ptak
    BUDAPEST/WARSAW, Nov 5 (Reuters) - Expectations for some
strong quarterly earnings reports helped to boost the Budapest
and Warsaw stock markets on Monday, along with hopes that
tensions are easing in the U.S.-China trade war.
    Budapest stocks touched a six-month high and were up
1.6 percent at 1441 GMT, boosted by a more than 3 percent rise
in the shares of drug maker Richter and an almost 2
percent gain by OTP, Central Europe's biggest
independent lender.
    Expectations that they will release good earnings reports on
Wednesday and Friday respectively boosted their shares above
their 200-day moving averages. 
    Polish lender PKO, meanwhile, is expected to report
a 15 percent rise in third-quarter net profit early on Tuesday.
Its shares were up 2.5 percent to lead a 1.5 percent rise in
Warsaw's blue-chip index to a four-week high.

    "The surge is also a result of improved sentiment in the
equity market, especially in emerging economies, that are
exceptionally sensitive to the situation in China," said
Slawomir Kozlarek, trader at Santander brokerage. 
    October Purchasing Managers' Index (PMI) figures reported in
Poland on Friday and in Hungary on Monday showed divergence in
economic activity.
    Hungary's data showed a sharp pick-up to 57.3 from 54.1 in
September, but Polish numbers showed activity was close to
stalling.    
    The slowdown did not weigh on Polish assets as the figures
were not in line with alternative business surveys, analysts
said.
    The zloty firmed 0.3 percent, close to 4.30
against the euro but still short off Friday's peak.
    The forint, trading at 322.05, retreated from a
three-month high set at 321 on Friday, when Hungarian domestic
markets were closed for a public holiday.
    Central banks in Bucharest and Warsaw are expected to keep
interest rates on hold at their meetings on Tuesday and
Wednesday respectively, with U.S. mid-term elections and a
Federal Reserve meeting this week posing risks to global
markets.
    Poland's economic slowdown and a Romanian government plan to
freeze public sector wages provide arguments for not tightening
policy, analysts said.
    Government bonds in the region mostly tracked falling Bund
yields. Romania sold more than expected April 2025 Treasury
bonds at auction, with the average yield falling to 4.66 percent
from 4.82 percent in a sale two weeks ago.
    The Czech 10-year bond yield, however, was bid higher by 3
basis points to 2.14 percent. 
    The crown traded flat at 25.82 against the euro,
near levels before the Czech central bank delivered its fourth
straight interest rate increase on Wednesday.
    Concerns that the Czech government budget is too loose could
weigh on the currency, Commerzbank analysts said in a note.
    
            CEE       SNAPSHOT   AT                         
            MARKETS             1541 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.8200   25.8250    +0.02%    -1.08%
 crown      >                                       
 Hungary    <EURHUF=  322.0500  321.9500    -0.03%    -3.46%
 forint     >                                       
 Polish     <EURPLN=    4.3070    4.3206    +0.32%    -3.03%
 zloty      >                                       
 Romanian   <EURRON=    4.6610    4.6616    +0.01%    +0.40%
 leu        >                                       
 Croatian   <EURHRK=    7.4385    7.4375    -0.01%    -0.11%
 kuna       >                                       
 Serbian    <EURRSD=  118.4000  118.3500    -0.04%    +0.08%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1072.35  1067.730    +0.43%    -0.54%
                                       0            
 Budapest             37763.14  37155.21    +1.64%    -4.10%
 Warsaw                2230.30   2197.68    +1.48%    -9.38%
 Bucharest             8582.52   8563.37    +0.22%   +10.69%
 Ljubljana  <.SBITOP    800.72    803.66    -0.37%    -0.70%
            >                                       
 Zagreb                1773.20   1769.80    +0.19%    -3.78%
 Belgrade   <.BELEX1    740.93    742.68    -0.24%    -2.48%
            5>                                      
 Sofia                  594.70    596.80    -0.35%   -12.21%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    1.5670   -0.1000   +221bps    -10bps
            R>                                      
   5-year   <CZ5YT=R    1.8490    0.0100   +202bps     +1bps
            R>                                      
   10-year  <CZ10YT=    2.1450    0.0340   +172bps     +4bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.5540   -0.0120   +220bps     -1bps
            R>                                      
   5-year   <PL5YT=R    2.4470   -0.0200   +262bps     -2bps
            R>                                      
   10-year  <PL10YT=    3.2080   -0.0200   +278bps     -1bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                2.05      2.20      2.35      1.96
            <PRIBOR=                                
            >                                       
 Hungary                  0.34      0.60      0.96      0.16
                                                    
 Poland                   1.76      1.80      1.87      1.72
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 
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