August 22, 2016 / 9:36 AM / a year ago

CEE MARKETS-Stocks rebound helps zloty firm from lows

* Equities rebound in line with Western stock markets
    * Zloty weakest in almost 3 weeks, but rebounds
    * Polish budget plans add to risks on zloty-analysts

    By Sandor Peto and Jakub Iglewski
    BUDAPEST/WARSAW, Aug 22 (Reuters) - The Polish zloty
 eased in early trade on Monday on concerns over a
possible budget deficit overshoot, before regaining some ground
helped by a rebound of Europe's main equities indices. 
    In early trade the zloty fell to its weakest level in almost
3-weeks against the euro, after a source said Poland would set
its budget deficit target at 2.9 percent of economic output for
2017, just a touch below the European Union's 3 percent ceiling.
    A deficit overshoot could open a new front with the European
Commission which is also challenging Poland over changes to its
supreme court.
    Such local factors can easily lift volatility in the EU's
emerging markets at a time when global risk appetite is
uncertain amid speculation about possible Federal Reserve
interest rate hikes.       
     The news about Poland's budget "Won't help the currency in
the following days," Bank Pekao analysts said in a note, adding
that the currency could test weaker levels than 4.32 against the
euro soon.
    The zloty traded at 4.3076 at 0839 GMT, firmer by 0.1
percent from Friday's close, and off early lows at 4.318.
    A rise of financial sector stocks helped Warsaw's bluechip
stock index rise by 0.3 percent and Prague's main index
 firm 0.6 percent.
    The rise ends a week of losses posted by Polish bank shares
. 
    Polish bank stocks have retreated from multi-month highs hit
earlier this month on a plan to tackle the problem of Swiss
franc loans in the banking system, which looked less painful to
lenders than earlier thought.
    Some details of the scheme are still unclear and risks over
Poland's budget and dispute with Brussels would justify a zloty
retreat to 4.35, Raiffeisen analyst Wofgang Ernst said.
    "Moreover, speculation on rate cuts in Poland could
intensify on the back of recent disappointing economic data,
contributing to additional PLN weakening," he said in a note.
    The Polish government source also said that the finance
ministry had cut its economic growth forecast for 2016 to 3.4
percent from 3.8 percent.
    That would be still much faster than euro zone growth.
    The leu firmed 0.1 percent to 4.4615 versus the
euro, after Moody's did not change Romania's sovereign ratings
on Friday despite some concerns that it may lower the outlook on
the rating from 'positive'.
    Romania has boosted wages and cut value-added taxes as
governments in the region loosen their budgets to try to lift
inflation from anaemic levels and fight a flight of skilled
labour into richer Western countries.
           CEE      SNAP   AT  1039       
           MARKETS  SHOT  CET         
                    CURRENCIES            
                    Late  Prev  Dail  Chan
                    st    ious  y     ge
                    bid   clos  chan  in
                          e     ge    2016
 Czech     <EURCZK  27.0  27.0   +0.  -0.0
 crown     =>        220   240   01%    9%
 Hungary   <EURHUF  310.  310.  -0.0  1.40
 forint    =>       3000  1450    5%     %
 Polish    <EURPLN  4.30  4.31   +0.  -1.1
 zloty     =>         76    30   12%    5%
 Romanian  <EURRON  4.46  4.46   +0.  1.29
 leu       =>         15    46   07%     %
 Croatian  <EURHRK  7.48  7.48  -0.0  2.00
 kuna      =>         90    45    6%     %
 Serbian   <EURRSD  123.  123.  -0.0  -1.4
 dinar     =>       2500  2300    2%    4%
 Note:     calcula  prev  clos  1800      
 daily     ted      ious  e at  CET   
 change    from                       
                    STOC                  
                    KS                
                    Late  Prev  Dail  Chan
                    st    ious  y     ge
                          clos  chan  in
                          e     ge    2016
 Prague             852.  847.   +0.  -10.
                      85    60   62%   82%
 Budapest           2760  2759   +0.   +15
                    6.22  9.77   02%  .41%
 Warsaw    <.WIG20  1805  1800   +0.  -2.8
           >         .62   .17   30%    8%
 Buchares           6900  6907  -0.1  -1.4
 t                   .32   .86    1%    8%
 Ljubljan  <.SBITO  720.  725.  -0.6   +3.
 a         P>         81    34    2%   54%
 Zagreb    <.CRBEX  1790  1792  -0.1   +5.
           >         .66   .81    2%   98%
 Belgrade  <.BELEX  618.  619.  -0.1  -4.0
           15>        22    00    3%    2%
 Sofia     <.SOFIX  468.  466.   +0.   +1.
           >          29    60   36%   60%
                    BOND                  
                    S                 
                    Yiel  Yiel  Spre  Dail
                    d     d     ad    y
                    (bid  chan  vs    chan
                    )     ge    Bund  ge
                                      in
 Czech                                spre
 Republic                             ad
   2-year  <CZ2YT=  -0.2  0.01   +03   +2b
           RR>        24     7  9bps    ps
   5-year  <CZ5YT=  -0.0  0.00   +04   +1b
           RR>        92     7  1bps    ps
           <CZ10YT  0.30  -0.0   +03   +2b
 10-year   =RR>        8    05  6bps    ps
 Poland                                   
   2-year  <PL2YT=  1.58  0.02   +22   +2b
           RR>         7     1  0bps    ps
   5-year  <PL5YT=  2.09  0.01   +26   +3b
           RR>         5     8  0bps    ps
           <PL10YT  2.67  0.01   +27   +3b
 10-year   =RR>        3        3bps    ps
           FORWARD  RATE  AGREEMENT       
                    3x6   6x9   9x12  3M
                                      inte
                                      rban
                                      k
 Czech     <CZKFRA  0.29  0.25  0.21     0
 Rep       ><PRIBO                    
           R=>                        
 Hungary   <HUFFRA  0.73  0.72  0.74  0.84
           ><BUBOR                    
           =>                         
 Poland    <PLNFRA  1.59  1.52  1.49  1.71
           ><WIBOR                    
           =>                         
 Note:     are for                        
 FRA       ask                        
 quotes    prices                     
 *****************************************
 *********************
 
 (Additional reporting by Radu Marinas in Bucharest; Editing by
Keith Weir)

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