December 3, 2018 / 11:07 AM / 8 days ago

CEE MARKETS-Trade truce boosts stocks, currencies, despite fall in PMIs

    * Polish PMI falls below 40 for the first time since 2014
    * Zloty, forint and crown still firm as dollar gives up
ground
    * Regional stock indices hit multi-month highs 

    By Sandor Peto
    BUDAPEST, Dec 3 (Reuters) - Central European stocks hit
multi-month highs and currencies mostly gained on Monday, helped
by a truce in the U.S.-China trade war and unaffected by a drop
in manufacturing sentiment indices.
    Regional currencies strengthened. The relatively volatile
forint gained almost half a percent against the euro
to trade at 322.4 at 0952 GMT.
    The zloty hit a four-week high beyond 4.28 versus the euro
and then retreated to 4.2817, still up by 0.2 percent.  The
Czech crown rose 0.1 percent to 25.948.
    In stock markets, Budapest's main index rose above
the 40,000-point mark for the first time in 10 months, gaining
more than 1 percent. Warsaw's blue-chip index which
reached its highest level in 3 months.
    Romanian stocks, rose 0.6 percent to their highest
in six and a half months.
    Regional assets mostly advanced even though November
Purchasing Managers' Indices (PMIs) released in Budapest, Prague
and Warsaw fell.
    Warsaw's index even fell below the 50-point mark, which
separates economic contraction from growth, for the first time
since September 2014.
    "The PMI reading seems to signal clearly that worsening of
business climate abroad is passing through to domestic
manufacturing; however, it should be noted that other business
surveys were not as pessimistic," Santander Bank said in a note.
    A drop in Hungary's index to 53.5 from 57.1 in October
confirmed wage increases and consumption may be slowing, while
companies face capacity bottlenecks from a shortage of labour,
analysts said.
    "Growth is likely to slow in the fourth quarter and the
first quarter of next year," ING analyst Peter Virovacz said.  
"Many companies complain that they are unable to run at more
than 60 to 70 percent of their capacities," he added.
    The data and a surprise decline in Poland's annual inflation
to 1.2 percent in November underpin that the country's central
bank will keep rates on hold on Wednesday and retain its
forecast for keeping them unchanged, possibly for years,
analysts said.
    Poland's 10-year government bond yield dropped 1
basis point to 3.03 percent. Hungarian yields, which traded at
multi-month lows last week tracked a rise in U.S. Treasury
yields, with 10-year debt trading at 3.14 percent.
    
            CEE       SNAPSHOT   AT                         
            MARKETS             1052 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.9480   25.9750    +0.10%    -1.56%
 crown      >                                       
 Hungary    <EURHUF=  322.4000  323.8200    +0.44%    -3.56%
 forint     >                                       
 Polish     <EURPLN=    4.2817    4.2900    +0.19%    -2.46%
 zloty      >                                       
 Romanian   <EURRON=    4.6556    4.6510    -0.10%    +0.52%
 leu        >                                       
 Croatian   <EURHRK=    7.4030    7.4055    +0.03%    +0.37%
 kuna       >                                       
 Serbian    <EURRSD=  118.1000  118.2000    +0.08%    +0.34%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1074.84  1068.650    +0.58%    -0.31%
                                       0            
 Budapest             40612.09  40109.37    +1.25%    +3.14%
 Warsaw                2317.32   2291.08    +1.15%    -5.85%
 Bucharest             8717.47   8665.36    +0.60%   +12.43%
 Ljubljana  <.SBITOP    821.73    823.89    -0.26%    +1.90%
            >                                       
 Zagreb                1734.83   1729.38    +0.32%    -5.86%
 Belgrade   <.BELEX1    743.44    747.61    -0.56%    -2.15%
            5>                                      
 Sofia                  598.02    592.12    +1.00%   -11.72%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    1.7500    0.1150   +234bps    +11bps
            R>                                      
   5-year   <CZ5YT=R    1.8020   -0.0010   +206bps     -1bps
            R>                                      
   10-year  <CZ10YT=    2.0790    0.0190   +175bps     +0bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.5450    0.0020   +213bps     -1bps
            R>                                      
   5-year   <PL5YT=R    2.4690   -0.0050   +273bps     -2bps
            R>                                      
   10-year  <PL10YT=    3.0330   -0.0110   +271bps     -3bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                2.19      2.31      2.33      2.02
            <PRIBOR=                                
            >                                       
 Hungary                  0.31      0.53      0.80      0.13
                                                    
 Poland                   1.74      1.77      1.80      1.72
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 *************************************************          
 *************                                      
 
 (Reporting by Sandor Peto)
  
 
 
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