May 18, 2018 / 2:28 PM / in 5 months

CEE MARKETS-Selling reaches stocks as dollar resumes firming

    * Tracking euro/dollar, CEE currencies mostly ease
    * Forint hits 23-month low, central bank to meet on Tuesday
    * Selling reaches CEE stocks, they underperform Europe

 (Recasts with fall in stock indices, retreat of currencies and
bonds)
    By Sandor Peto and Marcin Goclowski
    BUDAPEST/WARSAW, May 18 (Reuters) - Central European assets
fell on Friday, with the week's regional sell-off also spreading
into equity markets as the dollar resumed its strengthening in
global markets.
    A rise in U.S. debt market yields and a firming of the
dollar caused selling and repricing of assets in emerging
markets, including Central Europe, earlier this month.
    The U.S. 10-year Treasury yield retreated slightly on
Friday, but after a brief pause, the dollar renewed its rally
and surged through the 1.18 line against the euro,
reaching its strongest levels this year.
    The forint hit a 23-month low against the euro at
318.55, to regain some ground later, trading at 318.34 at 1351
GMT, still weaker by 0.3 percent from Thursday.
    Hungary's central bank is expected to confirm its loose
policy stance at its meeting on Tuesday.
    It will be closely watched for any comment on this month's
rise in both short- and long-term market interest rates and a
curve steepening, which widened the spread of 10-year bond
yields over Bunds by about 50 basis points, traders said.
    The zloty and the Czech crown shed 0.1
percent, and Polish government bonds gave up most of their early
gains.
    The past weeks' sell-off mainly hit currencies and
government bonds in emerging markets, but it also engulfed
equities in Central Europe on Friday.
    Regional stock markets mostly well underperformed European
peers, with Budapest's main index shedding 1.4
percent, Bucharest 1.3 percent and Warsaw 1
percent.
    "It is possible that a capital withdrawal wave has started
in emerging equity markets and that has reached us," said Eszter
Gargyan, analyst of Citigroup in Budapest.
    "How it will develop, will depend on positioning in
individual markets and the participation of overseas investors,
or more stable European investors," she added.
    In Budapest, pharmaceutical Richter led the
decline.
    It shed more than 3 percent after European health regulators
said Richter's Esmya medicine used to treat benign tumours of
the womb may have contributed to some cases of serious liver
damage. 
    Bucharest's index fell in the fourth session in a row. 
    It continued to retreat from 10-year highs reached 3 weeks
ago, but it is still the best performer out of the region's main
stock markets this year. It has gained 8.4 percent since the end
of 2017, compared with Warsaw's 9.3 percent loss.
    
            CEE         SNAPSHOT   AT                         
            MARKETS               1551 CET            
                        CURRENCI                              
                        ES                            
                        Latest    Previous  Daily     Change
                        bid       close     change    in 2018
 Czech                   25.6350   25.6160    -0.07%    -0.36%
 crown                                                
 Hungary                318.3400  317.4800    -0.27%    -2.33%
 forint                                               
 Polish                   4.3010    4.2962    -0.11%    -2.90%
 zloty                                                
 Romanian                 4.6340    4.6369    +0.06%    +0.99%
 leu                                                  
 Croatian                 7.3820    7.3820    +0.00%    +0.65%
 kuna                                                 
 Serbian                117.9600  118.1500    +0.16%    +0.46%
 dinar                                                
 Note:      calculated from                 1800 CET          
 daily                                                
 change                                               
                                                              
                        Latest    Previous  Daily     Change
                                  close     change    in 2018
 Prague                  1105.98  1107.390    -0.13%    +2.58%
                                         0            
 Budapest               37030.32  37538.04    -1.35%    -5.96%
 Warsaw                  2232.39   2255.78    -1.04%    -9.30%
 Bucharest               8403.61   8511.49    -1.27%    +8.38%
 Ljubljana                896.10    898.81    -0.30%   +11.13%
 Zagreb                  1859.01   1845.70    +0.72%    +0.88%
 Belgrade                 744.11    744.24    -0.02%    -2.07%
 Sofia                    647.71    649.98    -0.35%    -4.39%
                        BONDS                                 
                        Yield     Yield     Spread    Daily
                        (bid)     change    vs Bund   change
                                                      in
 Czech                                                spread
 Republic                                             
   2-year                 0.9000    0.1090   +146bps    +11bps
   5-year                 1.3500    0.0560   +139bps     +9bps
   10-year  <CZ10YT=RR    1.8960    0.0190   +129bps     +5bps
            >                                         
 Poland                                                       
   2-year                 1.6350    0.0030   +220bps     +1bps
   5-year                 2.5610    0.0130   +260bps     +4bps
   10-year  <PL10YT=RR    3.3150   -0.0010   +271bps     +3bps
            >                                         
            FORWARD     RATE      AGREEMEN                    
                                  T                   
                        3x6       6x9       9x12      3M
                                                      interban
                                                      k
 Czech Rep          <P      1.00      1.15      1.29      0.90
            RIBOR=>                                   
 Hungary            <B      0.27      0.39      0.49      0.10
            UBOR=>                                    
 Poland             <W      1.76      1.79      1.84      1.70
            IBOR=>                                    
 Note: FRA  are for ask prices                                
 quotes                                               
 ***************************************************          
 ***********                                          
 
 (Reporting by Sandor Peto
Editing by Louise Heavens/Keith Weir)
  
 
 
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