October 1, 2018 / 10:28 AM / 8 months ago

CEE MARKETS-Currencies and shares firm despite weaker PMIs

    * Recovery in Turkish lira helps currencies and stocks
    * Czech and Hungarian PMIs surprise on the downside
    * Polish inflation retreats, no change seen in monetary

    By Sandor Peto
    BUDAPEST, Oct 1 (Reuters) - Central European currencies and
some stocks firmed on Monday as rising risk appetite, helped by
the Turkish lira's rebound, offset weak manufacturing PMI
    Stocks in emerging markets also gained support from a 
trilateral trade deal in North America.
    Warsaw's blue-chip index rose 1.4 percent by 0926
GMT. Budapest's index touched a four-week high before
losing some ground. Bucharest rose, though it was off
four-month highs set last week, similar to Prague.
    Polish and Czech PMI indices for September dropped more than
expected from August, with the Polish index at 50.5 and close to
the 50 mark that separates economic growth from contraction. 
    The Hungarian index dropped to 53.8 from 56.
    Analysts said the figures added to signs that the region's
fast economic growth was shifting to a slower pace. Germany's
PMI figures also indicated a slowdown.
    Tension over trade between the United States and its main
partners weighs on growth prospects for the CEE region, where
the automobile industry -- a focus of the dispute -- is a key
growth driver, analysts said.
    "The Czechs still see a rise in output and orders next
year," said Noemi Holecz, analyst at brokerage Equilor. "But
business confidence is weakening, they worry over the (global)
trade war and fear an erosion in competitiveness, while
inflation can also increase costs."
    The figures are unlikely to lead to any change in monetary
policy of the region's central banks, which is loose in Hungary
and Poland and hawkish in Prague, analysts said.
    Polish flash figures showed a bigger than expected drop in
annual inflation in September, to 1.8 percent. 
    The Czech crown and Poland's zloty
gained 0.1 percent against the euro while the Hungarian forint
also firmed slightly.    
    "Sentiment in the currency market is helped by the lira's
rebound ... even though the jitters there can, of course, return
any time," one Budapest dealer said.
    The Romanian leu bucked the trend, easing 0.1
percent to 4.659 versus the euro.
    It had rebounded on Friday, partly in late international
trade, after a weeks-long slide that took it to three-month lows
last Thursday.
    "The central bank (NBR) in Romania still seems to have a
hand on the exchange rate, fearing that a weak RON (leu) could
further fuel inflation woes," Erste analysts said in a note.
    "But the latter (while admittedly on a somewhat uncertain
path) is expected to slowly ease and thus remove some of the
pressure on the NBR to keep the RON at stronger levels."
    The bank, which twice increased interest rates this year to
fight inflation, is due to meet on Wednesday and is expected to
keep its 2.5 percent main interest rate unchanged.
            CEE       SNAPSHOT   AT                         
            MARKETS             1126 CET            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.7500   25.7750    +0.10%    -0.81%
 crown      >                                       
 Hungary    <EURHUF=  323.4500  323.5000    +0.02%    -3.88%
 forint     >                                       
 Polish     <EURPLN=    4.2777    4.2817    +0.09%    -2.37%
 zloty      >                                       
 Romanian   <EURRON=    4.6590    4.6549    -0.09%    +0.44%
 leu        >                                       
 Croatian   <EURHRK=    7.4330    7.4325    -0.01%    -0.04%
 kuna       >                                       
 Serbian    <EURRSD=  118.2200  118.3000    +0.07%    +0.24%
 dinar      >                                       
 Note:      calculated from               1800 CET          
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1100.92  1101.920    -0.09%    +2.11%
 Budapest             37084.98  37171.41    -0.23%    -5.82%
 Warsaw                2317.07   2285.11    +1.40%    -5.86%
 Bucharest             8434.23   8412.72    +0.26%    +8.78%
 Ljubljana  <.SBITOP    839.27    832.23    +0.85%    +4.08%
 Zagreb                1783.63   1782.15    +0.08%    -3.21%
 Belgrade   <.BELEX1    724.87    727.08    -0.30%    -4.60%
 Sofia                  623.81    624.39    -0.09%    -7.92%
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
 Czech                                              spread
   2-year   <CZ2YT=R    1.5880    0.1290   +213bps    +13bps
   5-year   <CZ5YT=R    1.8600   -0.0010   +198bps     -2bps
   10-year  <CZ10YT=    2.1600   -0.0250   +166bps     -5bps
   2-year   <PL2YT=R    1.5570   -0.0180   +210bps     -2bps
   5-year   <PL5YT=R    2.5570    0.0070   +267bps     -1bps
   10-year  <PL10YT=    3.2710    0.0360   +277bps     +1bps
            FORWARD   RATE      AGREEMEN                    
                      3x6       6x9       9x12      3M
 Czech Rep                1.97      2.13      2.23      1.72
 Hungary                  0.38      0.64      0.92      0.17
 Poland                   1.77      1.79      1.85      1.72
 Note: FRA  are for ask prices                              
 (Additional reporting by Radu Marinas in Bucharest
Editing by David Goodman
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