August 2, 2019 / 9:15 AM / 4 months ago

CEE MARKETS-Trump's China tariffs send tremor through markets

    By Alan Charlish
    WARSAW, Aug 2 (Reuters) - Central European assets fell again
on Friday, knocked down by U.S. President Donald Trump's
announcement that he would impose 10% tariffs on $300 billion of
Chinese products next month.
    Coming just a day after Federal Reserve Chairman Jerome
Powell suggested the first U.S rate cut in over a decade was not
the start of a lengthy series, Trump's announcement was a fresh
blow to risk-sensitive emerging-market assets.
    At 0750 GMT, the Hungarian forint was down 0.19%
against the euro at 327.68. The Polish zloty shed
0.06% to 4.3107. The Czech crown was at 25.795, near
the 14-month low hit on Thursday.
    "In our view current levels (above 4.31 after the Trump
decision) could trigger some demand for the zloty," Santander
analysts said in a note, adding that information about tariffs
against China is generally negative for the emerging market
currencies.
    "If non-farm payrolls surprise to the upside (forecasts are
rather low), the market could postpone its pricing of cuts in
the US and this could weigh on the zloty again."
    U.S non-farm payrolls will be announced at 1230 GMT.
    Stocks mostly tracked global shares lower. Prague's PX
index shed 0.9% and Poland's benchmark WIG 20 index
fell 0.6% as of 0806 GMT.
    Czech 10-year bond yields fell to their lowest
since September 2017 at 1.145. Polish 10-year yields
fell 7 basis points to 2.129.
    On Thursday, the Czech National Bank (CNB) left its two-week
repo rate at 2.00%, and signalled rates would
remain unchanged in coming quarters, as momentum in the domestic
economy offsets monetary easing abroad.
    "We do not change our forecast for this year now and still
expect stability of rates," Erste Group analyst Jiri Polansky
said in a note. "The CNB will be cautious and wait to see how
the situation around the Brexit and a possibility of an increase
of US trade tariffs on EU cars develops."
    In Hungary, calendar-adjusted retail sales rose
by an annual 5.2% in June after a 2.6% increase in May, the
Central Statistics Office (KSH) said on Friday.
    "At first sight, this looks strong enough, but compared to
what we've been used to in the past 18 months, it is definitely
a sign of weaker activity," ING analyst Peter Virovacz said in a
note, adding he expects consumption to slow, curbing growth.

    
            CEE        SNAPSHOT   AT                         
            MARKETS              1037 CET            
                       CURRENCI                              
                       ES                            
                       Latest    Previous  Daily     Change
                       bid       close     change    in 2019
 Czech                  25.7920   25.7710    -0.08%    -0.33%
 crown                                               
 Hungary               327.7500  327.1000    -0.20%    -2.03%
 forint                                              
 Polish                  4.3090    4.3058    -0.07%    -0.45%
 zloty                                               
 Romanian                4.7340    4.7333    -0.01%    -1.69%
 leu                                                 
 Croatian                7.3840    7.3833    -0.01%    +0.35%
 kuna                                                
 Serbian               117.6000  117.7100    +0.09%    +0.60%
 dinar                                               
 Note:      calculated from                1800 CET          
 daily                                               
 change                                              
                                                             
                       Latest    Previous  Daily     Change
                                 close     change    in 2019
 Prague                 1038.43  1047.080    -0.83%    +5.26%
                                        0            
 Budapest              40548.13  40474.27    +0.18%    +3.60%
 Warsaw                 2232.52   2240.78    -0.37%    -1.94%
 Bucharest              9072.20   9120.11    -0.53%   +22.87%
 Ljubljana               874.12    871.52    +0.30%    +8.69%
 Zagreb                 1902.63   1911.40    -0.46%    +8.80%
 Belgrade   <.BELEX15    737.31    738.54    -0.17%    -3.20%
            >                                        
 Sofia                   582.38    581.48    +0.15%    -2.03%
                       BONDS                                 
                       Yield     Yield     Spread    Daily
                       (bid)     change    vs Bund   change
                                                     in
 Czech                                               spread
 Republic                                            
   2-year   <CZ2YT=RR    1.0640    0.0100   +185bps     +3bps
            >                                        
   5-year   <CZ5YT=RR    1.0730    0.0250   +184bps     +4bps
            >                                        
   10-year  <CZ10YT=R    1.1450   -0.0700   +163bps     -4bps
            R>                                       
 Poland                                                      
   2-year   <PL2YT=RR    1.5360   -0.0260   +232bps     -1bps
            >                                        
   5-year   <PL5YT=RR    1.8250   -0.0570   +259bps     -4bps
            >                                        
   10-year  <PL10YT=R    2.1200   -0.0820   +261bps     -5bps
            R>                                       
            FORWARD    RATE      AGREEMEN                    
                                 T                   
                       3x6       6x9       9x12      3M
                                                     interban
                                                     k
 Czech Rep          <      2.12      2.00      1.90      2.16
            PRIBOR=>                                 
 Hungary            <      0.33      0.38      0.42      0.26
            BUBOR=>                                  
 Poland             <      1.73      1.73      1.73      1.72
            WIBOR=>                                  
 Note: FRA  are for ask prices                               
 quotes                                              
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 (Reporting by Alan Charlish, editing by Larry King)
  
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