October 30, 2018 / 11:37 AM / a year ago

CEE MARKETS-MOL helps Budapest stock index buck declines

    * Stocks mostly retreat, MOL rises ahead of earnings report
    * Currencies tread water, tracking euro/dollar

    By Sandor Peto
    BUDAPEST, Oct 30 (Reuters) - Expectations for a rise in
Hungarian oil group MOL's quarterly profit lifted
Budapest's stock index on Tuesday, even though Central European
stocks mostly gave up some ground after a rebound on Monday.
    The region's stock indexes, like euro zone counterparts,
were choppy and stayed near their previous closes as some German
firms including Lufthansa reported disappointing
earnings, while government bonds were little changed.  
    Budapest's stock index was buoyed by a 1.1 percent
rise in the shares of MOL, one of the region's leading oil
groups. MOL is due to report third-quarter earnings before
markets open on Wednesday.
    A poll of analysts published by business news portal
portfolio.hu late on Monday projected a 65-percent year-on-year 
increase in MOL's after-tax earnings in the third quarter.
    The shares of Poland's Lotos rose by 2.2 percent
after the refiner reported a rise in third-quarter profits, but
the Warsaw bourse's blue-chip index still shed 0.3
    Central European currencies tracked the euro/dollar rate in
rangebound and thin trade, after a weakening on Monday as the
euro got hit by uncertainty over German Chancellor Angela
Merkel's hold on office.
    After gaining some ground in early trade, the euro came
under pressure from weaker-than-expected third-quarter output
growth figures from the euro zone, Central Europe's main trading
    The Hungarian forint and Polish zloty
traded near multi-week lows against the euro at 1010 GMT.
    The Czech crown was steady at 25.879 versus the
euro, near a 2-1/2-month low set in early trade at 25.905.
    The crown's relative weakness underpins expectations the
Czech central bank, the region's most hawkish monetary
authority, will continue to increase interest rates at its
meeting on Thursday to fight inflation.
    Its past rate hikes have not been effective in strengthening
the crown as international market sentiment has turned against
currencies in the EU's emerging markets, but analysts believe
higher rates will eventually bolster the currency. 
    Meanwhile, Slovenia released Central Europe's first
inflation figure for October. Its annual inflation picked up to
2.3 percent from 2.2 percent in September.
    Poland's inflation figures, due on Wednesday, are not
expected to make the Polish central bank change its loose policy
stance, even though they are also expected to show a pick up,
analysts said.
    The forint may come under some pressure, however, if its
inflation figures next week do not show a retreat from 3.6
percent in September, one Budapest-based dealer said.
    "The central bank is unlikely to do any tightening measures
this year," the dealer said, adding this expectation could
weaken the forint if the inflation figures disappoint.
    Hungary and Croatia's hopes for credit rating upgrades make
their government bonds attractive, Raiffeisen analysts said in a
    "Overall the credit quality of CEE remains strong which
allowed the region to outperform Latin America and other EM
(emerging market) regions on (a) declining market," they said.
    Bid yields on Romanian government bonds, which are usually
slow to react to news, dipped, even though the government
reported a jump in the budget deficit in September.
            CEE       SNAPSHOT   AT                         
            MARKETS             1110 CET            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.8790   25.8800    +0.00%    -1.30%
 crown      >                                       
 Hungary    <EURHUF=  324.9600  324.7000    -0.08%    -4.32%
 forint     >                                       
 Polish     <EURPLN=    4.3270    4.3292    +0.05%    -3.48%
 zloty      >                                       
 Romanian   <EURRON=    4.6665    4.6674    +0.02%    +0.28%
 leu        >                                       
 Croatian   <EURHRK=    7.4300    7.4305    +0.01%    +0.00%
 kuna       >                                       
 Serbian    <EURRSD=  118.1400  118.2800    +0.12%    +0.30%
 dinar      >                                       
 Note:      calculated from               1800 CET          
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1049.74  1055.250    -0.52%    -2.64%
 Budapest             36174.09  36110.12    +0.18%    -8.13%
 Warsaw                2098.32   2103.72    -0.26%   -14.74%
 Bucharest             8513.53   8504.83    +0.10%    +9.80%
 Ljubljana  <.SBITOP    793.06    801.78    -1.09%    -1.65%
 Zagreb                1794.11   1789.42    +0.26%    -2.65%
 Belgrade   <.BELEX1    736.15    736.29    -0.02%    -3.11%
 Sofia                  598.77    602.38    -0.60%   -11.61%
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
 Czech                                              spread
   2-year   <CZ2YT=R    1.5540    0.0390   +221bps     +4bps
   5-year   <CZ5YT=R    1.8450    0.0050   +204bps     +0bps
   10-year  <CZ10YT=    2.1480    0.0020   +177bps     +0bps
   2-year   <PL2YT=R    1.5530   -0.0020   +221bps     -1bps
   5-year   <PL5YT=R    2.4470    0.0290   +264bps     +3bps
   10-year  <PL10YT=    3.1620    0.0200   +278bps     +2bps
            FORWARD   RATE      AGREEMEN                    
                      3x6       6x9       9x12      3M
 Czech Rep                2.05      2.20      2.35      1.80
 Hungary                  0.32      0.60      0.94      0.16
 Poland                   1.76      1.80      1.86      1.72
 Note: FRA  are for ask prices                              

 (Additional reporting by Radu Marinas in Bucharest; Editing by
Mark Potter)
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