May 12, 2020 / 9:32 AM / 25 days ago

CEE MARKETS-Stocks edge higher, crown underperforms in wake of central bank rate cut

    By Anita Komuves
    BUDAPEST, May 12 (Reuters) - Central European currencies
held stable and stock markets mostly edged higher even though
global investor sentiment suffered from worries of a second
coronavirus wave as lockdown measures are being lifted.
    Infection rates in Germany jumped and new clusters of
infections appeared in China and South Korea.
    Currencies in the region were mostly stable, with the Czech
crown underperfoming peers and losing 0.17% of its value to the
euro on the day, trading at 27.556 versus the common currency. 
    The Czech crown was weakened last week by the
higher-than-expected 75-basis-point rate cut by the central
bank, the third in a series of reductions aiming to mitigate the
economic effect of the pandemic. 
    The CNB is not ruling out using any tool at its disposal if
it can no longer lower rates despite needing to ease monetary
conditions further, board member Tomas Holub said on Monday.

    The Czech central bank on Monday cut its forecast for the
2020 public sector balance to a deficit of 4.8% of the GDP from
an earlier estimate of a 0.3% surplus.
    The crown was further weakened by the fresh CNB forecasts
and Holub's comments on Monday, according to a Commerzbank
analyst note. 
    "Further data is due for publication tomorrow (inflation)
and on Friday (first Q1 GDP estimate), and once again things
might get uncomfortable for koruna," the analysts added.
    Elsewhere, the forint was trading at 350.10 versus
the euro, down 0.07% on the day. 
    "The forint has settled on this narrow range between 348 and
352 to the euro in the past week," a trader in Budapest said. 
    "It is waiting for a new impetus to start going into either
direction, this could be fresh data about the Hungarian economy
or a step from the central bank," he added. 
    As economies are slowly starting to lift the lockdown
measures, investors could start to be more influenced by
national news besides developments in the pandemic, and
differentiate between regions once again, the trader added.
    The forint has recently outperformed its regional peers as
it was strengthened by the central bank's policy tightening and
by the slow start of the NBH's QE program last week. 
   The NBH is holding another tender today, and offered to buy
additional amounts of the 2030/A, 2031/A and 2038/A government
bond series from local lenders. Results will be announced at
1100 GMT.
    The bank bought 79 billion forints ($243.8 million) worth of
government bonds from local banks last week, including 50
billion worth of the same three series at the inaugural tender.

    Most regional stock markets edged up by 0740 GMT. Budapest
 equities were up 0.18%, Warsaw gained 0.33%
while Bucharest lost 0.35%.
    Prague's blue chip index led gains, adding 1% as
utility company CEZ reported a jump in first-quarter
net profit. Shares of CEZ were up 2.67% by 0900 GMT.

                   CEE      SNAPSHO   AT                      
                   MARKETS  T        0940              
                            Latest   Previou  Daily    Change
                            bid      close    change   in 2020
 EURCZK  Czech     <EURCZK  27.5560  27.5100   -0.17%   -7.71%
 =       crown     =>                                  
 EURHUF  Hungary   <EURHUF  350.100  349.850   -0.07%   -5.41%
 =       forint    =>             0        0           
 EURPLN  Polish    <EURPLN   4.5570   4.5585   +0.03%   -6.60%
 =       zloty     =>                                  
 EURRON  Romanian  <EURRON   4.8300   4.8287   -0.03%   -0.86%
 =       leu       =>                                  
 EURHRK  Croatian  <EURHRK   7.5630   7.5623   -0.01%   -1.55%
 =       kuna      =>                                  
 EURRSD  Serbian   <EURRSD  117.540  117.590   +0.04%   +0.03%
 =       dinar     =>             0        0           
         Note:     calculated from            1800            
         daily                                CET      
                            Latest   Previou  Daily    Change
                                     close    change   in 2020
 .PX     Prague              894.65  885.940   +0.98%  -19.81%
 .BUX    Budapest           34969.6  34908.1   +0.18%  -24.12%
                                  4        2           
 .WIG20  Warsaw    <.WIG20  1592.56  1587.31   +0.33%  -25.93%
 .BETI   Buchares           8376.99  8406.04   -0.35%  -16.04%
 .SBITO  Ljubljan  <.SBITO   799.55   798.02   +0.19%  -13.64%
 P       a         P>                                  
 .CRBEX  Zagreb    <.CRBEX  1543.33  1544.34   -0.07%  -23.50%
 .BELEX  Belgrade  <.BELEX   667.62   667.62   +0.00%  -16.72%
 15                15>                                 
 .SOFIX  Sofia     <.SOFIX   450.43   449.77   +0.15%  -20.72%
                            Yield    Yield    Spread   Daily
                            (bid)    change   vs Bund  change
         Czech                                         spread
 CZ2YT=    2-year  <CZ2YT=   0.1550  -0.1950   +089bp   -22bps
 RR                RR>                              s  
 CZ5YT=    5-year  <CZ5YT=   0.3670  -0.2180   +107bp   -25bps
 RR                RR>                              s  
 CZ10YT            <CZ10YT   1.0200  -0.0510   +152bp    -8bps
 =RR     10-year   =RR>                             s  
 PL2YT=    2-year  <PL2YT=   0.5720   0.0130   +131bp    -1bps
 RR                RR>                              s  
 PL5YT=    5-year  <PL5YT=   1.0510  -0.0180   +175bp    -5bps
 RR                RR>                              s  
 PL10YT            <PL10YT   1.5020  -0.0120   +200bp    -4bps
 =RR     10-year   =RR>                             s  
                            3x6      6x9      9x12     3M
         Czech     <CZKFRA     0.27     0.29     0.30     0.87
         Rep       ><PRIBO                             
         Hungary   <HUFFRA     1.00     0.96     0.94     1.07
         Poland    <PLNFRA     0.32     0.33     0.37     0.68
         Note:     are for ask                                
         FRA       prices                              

 (Additional reporting by Jason Hovet in Prague)
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