October 2, 2018 / 9:50 AM / 2 months ago

CEE MARKETS-Currencies, stocks fall on euro zone worry over Italy

    * Forint, zloty leads easing, but stay near multi-week highs
    * Czech crown sets two-month low, leu resumes easing
    * Warsaw stocks retreat from 4-week highs

    By Sandor Peto
    BUDAPEST, Oct 2 (Reuters) - Central European currencies and
stocks eased on Tuesday as comments from a senior Italian
official fuelled worries over the country's euro zone
membership.
    A rise in the dollar and crude prices also weighed on
currencies in other emerging economies.
    Comments from Claudio Borghi, the economic head of Italy's
ruling League party further dented sentiment in markets in the
European Union's eastern wing.
    He said Italy would enjoy more favourable economic
conditions outside the euro zone. Coupled with existing worries
over Italy's increased budget deficit, this sent the euro lower.
 
    Central European economies are tightly integrated with the
euro zone.
    The forint and the zloty weakened by a
third of a percent against the euro by 0901 GMT, but they stayed
near their strongest levels for several weeks.
    The crown and the leu underperformed
them in the past weeks, even though the Czech and Romanian
central banks have increased their interest rates to fight a
rise in inflation in the past two years.
    The crown has been weakening since the Czech bank delivered
its third straight rate hike on Sept. 26, but stopped short of
committing itself to another increase this year, even though it
made it clear that rates would continue to rise.
    The crown eased a quarter of a percent to 25.8
against the euro, off a 2-month low touched at 25.875 early on
Tuesday.
    Czech government bond yields were bid lower by about 1 basis
point, while Polish yields rose slightly, with the 10-year yield
rebounding to 3.22 percent from Monday's 4-week lows reached a
touch below 3.2 percent. 
    The leu eased 0.1 percent to 4.666 versus the
euro, approaching last week's 3-month lows.
    Pressure on the leu eased briefly earlier this week, after a
slide for almost three weeks.
    But it returned to its weakening path already on Monday
after the Romanian central bank pumped liquidity into the
banking system at its one-week repo auction, and demand at an
auction of 2031-expiry government bonds was weak.
    "Rationalizing access to central bank cash offerings doesn't
seem to be on the table for now," ING analysts said in a note.
    "But should the upward pressure on EUR/RON intensify we
might see a change in central bank liquidity management, driving
carry rates higher," they said.
    The bluechip index of Warsaw, the region's biggest
equities market fell one percent, tracking Western European
shares, retreating from Monday's 4-week highs.    
            CEE       SNAPSHOT   AT                         
            MARKETS             1101 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.8600   25.8000    -0.23%    -1.23%
 crown      >                                       
 Hungary    <EURHUF=  323.9300  322.9000    -0.32%    -4.02%
 forint     >                                       
 Polish     <EURPLN=    4.2970    4.2833    -0.32%    -2.81%
 zloty      >                                       
 Romanian   <EURRON=    4.6660    4.6625    -0.08%    +0.29%
 leu        >                                       
 Croatian   <EURHRK=    7.4290    7.4300    +0.01%    +0.02%
 kuna       >                                       
 Serbian    <EURRSD=  118.4500  118.4100    -0.03%    +0.04%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1099.13  1098.210    +0.08%    +1.94%
                                       0            
 Budapest             36671.66  36883.49    -0.57%    -6.87%
 Warsaw                2261.78   2284.01    -0.97%    -8.10%
 Bucharest             8471.19   8441.26    +0.35%    +9.25%
 Ljubljana  <.SBITOP    837.37    840.99    -0.43%    +3.84%
            >                                       
 Zagreb                1780.64   1781.36    -0.04%    -3.38%
 Belgrade   <.BELEX1    730.37    726.86    +0.48%    -3.87%
            5>                                      
 Sofia                  626.63    625.74    +0.14%    -7.50%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    1.4370   -0.0080   +202bps     +1bps
            R>                                      
   5-year   <CZ5YT=R    1.8240   -0.0120   +202bps     +3bps
            R>                                      
   10-year  <CZ10YT=    2.1600   -0.0110   +174bps     +4bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.5620   -0.0080   +215bps     +1bps
            R>                                      
   5-year   <PL5YT=R    2.5500    0.0190   +274bps     +6bps
            R>                                      
   10-year  <PL10YT=    3.2140    0.0040   +279bps     +5bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                1.96      2.10      2.22      1.73
            <PRIBOR=                                
            >                                       
 Hungary                  0.39      0.62      0.90      0.16
                                                    
 Poland                   1.77      1.78      1.85      1.72
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 *************************************************          
 *************                                      
 
 (Additional reporting by Radu Marinas in Bucharest
Editing by Matthew Mpoke Bigg)
  
 
 
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