January 10, 2020 / 10:17 AM / 9 days ago

CEE MARKETS-FX dip, stocks gain amid growth worries and Middle East jitters

    By Marton Dunai
    BUDAPEST, Jan 10 (Reuters) - The Hungarian forint led
moderate easing in emerging European currencies on Friday as a
combination of growth challenges, a slight rise in inflation and
a loose monetary policy played on investors minds. 
    The forint shed 0.3% against the euro, followed by a 0.2%
dip in the Czech crown and a 0.1% easing of the zloty. Stock
markets were up by about a third of a percent regionwide.
    Dealers said however that trading was lacklustre and real
money flows were yet to pick up in early 2020, and Middle East
worries over U.S.-Iran tensions eased despite possible evidence
of a Ukrainian jetliner shot down near Tehran.
    "We've seen the main events in Iran, and we've had the first
reactions," a Budapest-based dealer said. "The market is in a
wait and see position now, and we reckon neither side wants to
escalate the conflict for now."
    Iran wants to handle black box recordings from a Ukrainian
airliner that crashed, killing all 176 people aboard, after
Canada and others said the plane was brought down by an Iranian
missile, probably by mistake.
    Europe's top diplomats will meet on Friday to assess ways to
guide the United States and Iran away from open conflict,
knowing that a miscalculation from either side could leave the
bloc facing a war and a serious nuclear proliferation crisis at
its doorstep.            
    "Iran cannot emerge a winner from this conflict and the U.S.
has no interest in whipping up more of a storm either, so we
expect no real effect on markets for now," the dealer said.
    Other factors to influence markets from next week are the
impending signing of the U.S.-China trade deal and easing
uncertainty over Brexit as Britain enters a transition period
after leaving the European Union on Jan. 31.
    Later in the year most regional currencies are expected to
weaken, a Reuters poll showed. The Czech crown's strong run to
start 2020 is likely to reverse and the Hungarian forint will
creep back toward record lows as economies slow.
    Markets did not deviate from recent trends. The forint
remained firmly within its recent 331-335 EUR/HUF range. The
crown remained near its 23-month high.
    Growth concerns could affect emerging markets this year,
including on the eastern flank of Europe, with Hungary betting
it would not be able to withstand the slowdown without fiscal
    Prime Minister Viktor Orban flagged a new stimulus package
on Thursday, to be detailed next month.
            CEE        SNAPSHOT   AT                         
            MARKETS              1048 CET            
                       Latest    Previous  Daily     Change
                       bid       close     change    in 2020
 Czech                  25.2580   25.2210    -0.15%    +0.69%
 Hungary               333.8000  332.8000    -0.30%    -0.80%
 Polish                  4.2485    4.2455    -0.07%    +0.19%
 Romanian                4.7785    4.7781    -0.01%    +0.21%
 Croatian                7.4420    7.4453    +0.04%    +0.05%
 Serbian               117.5500  117.6200    +0.06%    +0.02%
 Note:      calculated from                1800 CET          
                       Latest    Previous  Daily     Change
                                 close     change    in 2020
 Prague                 1129.48  1126.660    +0.25%    +1.24%
 Budapest              45623.28  45493.15    +0.29%    -1.00%
 Warsaw                 2164.90   2157.61    +0.34%    +0.69%
 Bucharest              9952.92   9939.58    +0.13%    -0.24%
 Ljubljana               952.70    949.44    +0.34%    +2.90%
 Zagreb                 2029.49   2028.81    +0.03%    +0.60%
 Belgrade   <.BELEX15    797.85    800.22    -0.30%    -0.48%
 Sofia                   577.56    577.72    -0.03%    +1.66%
                       Yield     Yield     Spread    Daily
                       (bid)     change    vs Bund   change
 Czech                                               spread
   2-year   <CZ2YT=RR    1.8070    0.1190   +240bps    +12bps
   5-year   <CZ5YT=RR    1.4600   -0.0340   +196bps     -4bps
   10-year  <CZ10YT=R    1.6540    0.0330   +188bps     +4bps
   2-year   <PL2YT=RR    1.5260   -0.0270   +212bps     -2bps
   5-year   <PL5YT=RR    1.9400   -0.0050   +244bps     -1bps
   10-year  <PL10YT=R    2.2580   -0.0160   +248bps     -1bps
            FORWARD    RATE      AGREEMEN                    
                       3x6       6x9       9x12      3M
 Czech Rep          <      2.25      2.26      2.25      2.17
 Hungary            <      0.25      0.33      0.42      0.16
 Poland             <      1.75      1.75      1.78      1.71
 Note: FRA  are for ask prices                               

 (Reporting by Marton Dunai
Editing by Mark Heinrich)
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