May 23, 2019 / 10:14 AM / a month ago

CEE MARKETS-Assets weaker as major market trends keep investors on edge

    By Marton Dunai
    BUDAPEST, May 23 (Reuters) - Emerging European assets eased
in early trading on Thursday, with growth worries in major world
markets, Europe-wide elections and the U.S. Fed's reiteration of
its patient stance on interest rates seen keeping them under
pressure.
    Ahead of a Hungarian central bank meeting next week,
analysts said local monetary policy was only slightly
influencing flows. 
    "Hawkish Fed minutes, worries over trade wars and the
approaching Europe elections -- those are all hurting the mood
in the region," CSOB Prague said in a note to clients.
    The Hungarian forint, down 0.2% at 326.38 per euro
at 0820 GMT, could test the 330 level, while the Czech crown
, broadly flat at 25.83 versus the common currency,
could stick above 25.80, dealers and analysts said.
    With European Parliament elections beginning and the
prospect of a new Brexit referendum gaining traction in markets,
the euro could lose ground to the dollar and emerging European
currencies could slide by proxy, one dealer in Budapest said.
    Local monetary policy was less of a factor, and what little
effect it might have was largely priced in already. 
    In Hungary, which has one of the lowest interest rates in
the region, the central bank is expected to reassess policy next
Tuesday, when investors will look out for any signs of a hawkish
turn in its communication.
    "We are prepping for that psychologically, and that means
weakening for the forint now," an FX dealer said in Budapest.
"The central bank may signal something and then we can enter the
market at a weaker level - or not, in which case we already
priced in the weakening."
    Market players generally expect the National Bank of Hungary
to leave interest rates on hold next Tuesday, and expect more
guidance at the June meeting, when the central bank will discuss
its latest inflation report.
    Citi strategist Luis Costa said the NBH "will not be extra
hawkish" on Tuesday as it expected core inflation could retreat
in the coming quarters.
    "The NBH is sounding far more patient, in our view," the
strategist said in a note, citing a presentation by Deputy
Governor Marton Nagy last week.                                 
                           
    Bond markets were robust despite wobbles in international
markets, with regional yields stable and interest rates being
"about right where they are", a bond dealer said.
    Poland's retail sales came in well above forecasts, growing
by an annual 13.6% in April.
    Main stock indexes in the region were also lower, with
Warsaw pacing the slide, at 0.8 percent in the red.
    
            CEE        SNAPSHOT   AT                         
            MARKETS              1020 CET            
                       CURRENCI                              
                       ES                            
                       Latest    Previous  Daily     Change
                       bid       close     change    in 2019
 Czech                  25.8260   25.8150    -0.04%    -0.46%
 crown                                               
 Hungary               326.9000  326.3800    -0.16%    -1.78%
 forint                                              
 Polish                  4.3095    4.3048    -0.11%    -0.46%
 zloty                                               
 Romanian                4.7620    4.7634    +0.03%    -2.27%
 leu                                                 
 Croatian                7.4230    7.4265    +0.05%    -0.18%
 kuna                                                
 Serbian               117.8700  117.9700    +0.08%    +0.36%
 dinar                                               
 Note:      calculated from                1800 CET          
 daily                                               
 change                                              
                                                             
                       Latest    Previous  Daily     Change
                                 close     change    in 2019
 Prague                 1039.21  1042.680    -0.33%    +5.34%
                                        0            
 Budapest              40136.61  40184.85    -0.12%    +2.55%
 Warsaw                 2195.71   2214.36    -0.84%    -3.55%
 Bucharest              8115.03   8116.30    -0.02%    +9.90%
 Ljubljana               865.63    860.39    +0.61%    +7.63%
 Zagreb                 1866.76   1861.00    +0.31%    +6.74%
 Belgrade   <.BELEX15    732.98    731.00    +0.27%    -3.77%
            >                                        
 Sofia                   573.74    572.95    +0.14%    -3.49%
                       BONDS                                 
                       Yield     Yield     Spread    Daily
                       (bid)     change    vs Bund   change
                                                     in
 Czech                                               spread
 Republic                                            
   2-year   <CZ2YT=RR    1.7470    0.1120   +238bps    +12bps
            >                                        
   5-year   <CZ5YT=RR    1.7190    0.0630   +224bps     +9bps
            >                                        
   10-year  <CZ10YT=R    1.8140   -0.0050   +192bps     +2bps
            R>                                       
 Poland                                                      
   2-year   <PL2YT=RR    1.7490    0.0410   +238bps     +5bps
            >                                        
   5-year   <PL5YT=RR    2.2220   -0.0180   +274bps     +0bps
            >                                        
   10-year  <PL10YT=R    2.8530   -0.0150   +296bps     +1bps
            R>                                       
            FORWARD    RATE      AGREEMEN                    
                                 T                   
                       3x6       6x9       9x12      3M
                                                     interban
                                                     k
 Czech Rep          <      2.21      2.19      2.15      2.20
            PRIBOR=>                                 
 Hungary            <      0.36      0.53      0.69      0.20
            BUBOR=>                                  
 Poland             <      1.74      1.75      1.76      1.72
            WIBOR=>                                  
 Note: FRA  are for ask prices                               
 quotes                                              
 **************************************************          
 ************                                        
 
 (Additional reporting by Jason Hovet in PRAGUE; Editing by
Catherine Evans)
  
 
 
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