March 10, 2020 / 3:12 PM / 20 days ago

UPDATE 1-CEE MARKETS-Crown falls on rate talk, stocks up after slump

 (Updates throughout)
    By Jason Hovet and Anita Komuves
    PRAGUE/BUDAPEST, March 10 (Reuters) - The Czech crown hit a
near five-month low on Tuesday as rate cut bets grew amid global
unease over the spreading coronavirus, while central Europe's
stock markets recovered somewhat from their biggest drop since
the 2008 global financial crisis.
    With the global coronavirus outbreak gaining force in
Europe, assets in the region have been hit hard. A tumbling oil
price has unnerved markets even more, although markets found
some relief on Tuesday from expectations of stimulus measures to
soften the global economic blow.
    Budapest and Warsaw stock markets both slumped more than 7%
on Monday before making back some gains on Tuesday.
    In central Europe, rate setters have straddled slowing
economies and still strong inflation pressures.
    Czech central bank Governor Jiri Rusnok said on Tuesday he
did not currently see a need to cut interest rates in response
to the fallout but stood ready to act if it became necessary.
    Earlier, another Czech central banker, Ales Michl, said he
would propose a 25 basis point cut to help companies steer
through problems, a move that would reverse a surprise rate hike
decided in February.
    The crown fell as much as 0.9% on the day before
settling to trade down 0.3% at 25.61 to the euro at 1441 GMT.
Czech forward rates dropped slightly and showed bets of nearly
six rate cuts over the next year.
    "We think the central bank might react, later, but
definitely not as aggressively as the market is pricing. One of
the reasons is the weaker crown is delivering monetary easing,"
ING's chief economist in Prague, Jakub Seidler, said.    
    In Poland, rate-setter Lukasz Hardt called on Tuesday for a
wait-and-see strategy before changing rates although two of his
colleagues have said it was time to consider a rate cut.
    The Polish zloty was steady and Hungary's forint
 gained 0.2%, holding off record lows hit in recent
    The Romanian leu hit a fresh all-time low of
4.8255 to the euro on Tuesday, before edging back up, as
domestic political uncertainty ahead of a parliamentary vote of
confidence on Thursday added to investor nerves. Prime
Minister-designate Florin Citu's attempt to form a transitional
government before November elections remained uncertain.
    On stock markets, the market relief led to 1-2% gains after
steep drops seen on Monday, although Warsaw edged lower
in late trade.
    Central European governments stepped up measures to contain
the coronavirus spread on Tuesday. The Czechs announced they
would close schools indefinitely and ban events hosting more
than 100 people.  
    Romania has also shut schools and Poland said on Tuesday it
would cancel events that draw large crowds.

                   CEE      SNAPSHO   AT                      
                   MARKETS  T        1541              
                            Latest   Previou  Daily    Change
                            bid      close    change   in 2020
 EURCZK  Czech     <EURCZK  25.6100  25.5240   -0.34%   -0.70%
 =       crown     =>                                  
 EURHUF  Hungary   <EURHUF  335.710  336.390   +0.20%   -1.36%
 =       forint    =>             0        0           
 EURPLN  Polish    <EURPLN   4.3185   4.3169   -0.04%   -1.44%
 =       zloty     =>                                  
 EURRON  Romanian  <EURRON   4.8190   4.8213   +0.05%   -0.64%
 =       leu       =>                                  
 EURHRK  Croatian  <EURHRK   7.5490   7.5138   -0.47%   -1.37%
 =       kuna      =>                                  
 EURRSD  Serbian   <EURRSD  117.570  117.620   +0.04%   +0.00%
 =       dinar     =>             0        0           
         Note:     calculated from            1800            
         daily                                CET      
                            Latest   Previou  Daily    Change
                                     close    change   in 2020
 .PX     Prague              923.56  913.470   +1.10%  -17.22%
 .BUX    Budapest           38879.7  38075.8   +2.11%  -15.63%
                                  3        3           
 .WIG20  Warsaw    <.WIG20  1618.18  1625.99   -0.48%  -24.74%
 .BETI   Buchares           8845.46  8733.96   +1.28%  -11.34%
 .SBITO  Ljubljan  <.SBITO   843.94   818.10   +3.16%   -8.85%
 P       a         P>                                  
 .CRBEX  Zagreb    <.CRBEX  1659.07  1650.55   +0.52%  -17.76%
 .BELEX  Belgrade  <.BELEX   757.33   764.78   -0.97%   -5.53%
 15                15>                                 
 .SOFIX  Sofia     <.SOFIX   491.89   475.63   +3.42%  -13.42%
                            Yield    Yield    Spread   Daily
                            (bid)    change   vs Bund  change
         Czech                                         spread
 CZ2YT=    2-year  <CZ2YT=   1.7500  -0.0040   +267bp    -9bps
 RR                RR>                              s  
 CZ5YT=    5-year  <CZ5YT=   1.2070  -0.0380   +212bp   -11bps
 RR                RR>                              s  
 CZ10YT            <CZ10YT   1.1430   0.0230   +192bp    -5bps
 =RR     10-year   =RR>                             s  
 PL2YT=    2-year  <PL2YT=   1.1960   0.0030   +211bp    -9bps
 RR                RR>                              s  
 PL5YT=    5-year  <PL5YT=   1.3830   0.1270   +230bp    +5bps
 RR                RR>                              s  
 PL10YT            <PL10YT   1.5840   0.1510   +236bp    +8bps
 =RR     10-year   =RR>                             s  
                            3x6      6x9      9x12     3M
         Czech     <CZKFRA     1.82     1.42     1.10     2.34
         Rep       ><PRIBO                             
         Hungary   <HUFFRA     0.71     0.71     0.70     0.69
         Poland    <PLNFRA     1.45     1.17     1.05     1.70
         Note: FRA quotes are for                             
         ask prices                                    

 (Reporting by Anita Komuves in Budapest and Jason Hovet in
Prague; Editing by Sherry Jacob-Phillips and Susan Fenton)
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