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CEE MARKETS-Zloty weakens as Poland cuts GDP forecast
November 30, 2016 / 3:20 PM / 10 months ago

CEE MARKETS-Zloty weakens as Poland cuts GDP forecast

* Polish 2016 GDP growth forecast cut to 2.5-3 pct
    * Zloty eases, underperforming regional currencies
    * Czech bond auction draws healthy demand, yield curve
steeper
    * Equities markets mostly higher, after earlier fall

 (Recasts with retreat of Polish bonds, Czech auction, new
comments)
    By Sandor Peto and Jakub Iglewski
    BUDAPEST/WARSAW, Nov 30 (Reuters) - The zloty eased on
Wednesday, while other Central European assets were mixed, after
a downward revision to Poland's economic growth forecasts for
2016.
    Finance Minister Mateusz Morawiecki said the economy could
grow by 2.5-3 percent this year, cutting a previous forecast of
3.4 percent. 
    The zloty fell 0.2 percent to 4.446 against the
euro by 1428 GMT. 
    The leu surged 0.4 percent to the 4.5 line in
illiquid international trade as Bucharest markets were closed
for holiday. The forint rebounded from Tuesday's
four-month lows.
    Preliminary third-quarter economic output figures have
showed a slowdown across Central Europe, with economists largely
blaming slower inflows of European Union investment aid.
 
    Household consumption has remained robust as governments cut
taxes and lift spending, to fight a flight of skilled labour to
richer Western states and prepare for elections, raising the
risk of an inflation rebound.
    Romania will hold parliamentary elections in December and
Hungary in 2018. Morawiecki said that local governments curbed
investments to accelerate them closer to municipal elections in
2018.
    The breakdown of Poland's third-quarter GDP published on
Wednesday showed a pick-up in consumption and an accelerated
decline in investments. 
    Weak Polish growth until the middle of 2017 could keep the
zloty underperforming the forint, and Hungarian bonds, supported
by unorthodox policy easing by the central bank, are also less
vulnerable than Polish peers, ING analysts said in a note.
    Investors who dislike the idea of high regional market
volatility next year should choose the Czech crown 
which could firm around 5 percent next year if the central bank
abandons its cap which keeps the crown weaker than 27 per euro,
ING said.
    Czech markets, which usually ignore local politics, shrugged
off Tuesday's approval in the lower house of a bill designed to
limit politicians' business interests.  
    An auction of ultra low-yield Czech government bonds drew
healthy demand, with the yield curve steepening relative to an
auction three weeks ago.  
    The yield on the 3-year bonds sold dropped to -0.533 percent
from -0.528 percent.
    Polish bonds tracked retreat of euro zone peers. The yield
on 10-year Polish papers rose 10 basis points from morning lows
and 6 basis points from Tuesday's close, to 3.64 percent.
    Shares in Polish copper producer KGHM surged 3
percent.
    Initially they outperformed a rise in the Warsaw equities
index after a tremor killed at least three workers in
its Rudna mine, but rose as copper prices rebounded from
a one-week low.  
    
           CEE      SNAPSHOT   AT  1528 CET           
           MARKETS                              
                    CURRENCIES                        
                    Latest    Previous  Daily   Change
                    bid       close     change  in
                                                2016
 Czech     <EURCZK   27.0530   27.0635   +0.04  -0.20%
 crown     =>                                %  
 Hungary   <EURHUF  311.6000  311.8250   +0.07   0.98%
 forint    =>                                %  
 Polish    <EURPLN    4.4460    4.4365  -0.21%  -4.23%
 zloty     =>                                   
 Romanian  <EURRON    4.5000    4.5190   +0.42   0.42%
 leu       =>                                %  
 Croatian  <EURHRK    7.5380    7.5375  -0.01%   1.34%
 kuna      =>                                   
 Serbian   <EURRSD  122.9300  123.1300   +0.16  -1.19%
 dinar     =>                                %  
 Note:     calcula  previous  close at  1800          
 daily     ted                          CET     
 change    from                                 
                    STOCKS                            
                    Latest    Previous  Daily   Change
                              close     change  in
                                                2016
 Prague               878.97    879.33  -0.04%  -8.09%
 Budapest           30094.29  29816.30   +0.93   +25.8
                                             %      1%
 Warsaw    <.WIG20   1805.93   1780.04   +1.45  -2.86%
           >                                 %  
 Ljubljan  <.SBITO    690.72    693.81  -0.45%  -0.78%
 a         P>                                   
 Zagreb    <.CRBEX   1996.49   1992.47   +0.20   +18.1
           >                                 %      6%
 Belgrade  <.BELEX    694.63    692.21   +0.35   +7.85
           15>                               %       %
 Sofia     <.SOFIX    562.60    559.94   +0.48   +22.0
           >                                 %      7%
                    BONDS                             
                    Yield     Yield     Spread  Daily
                    (bid)     change    vs      change
                                        Bund    in
 Czech                                          spread
 Republic                                       
   2-year  <CZ2YT=    -0.776    -0.062  -004bp   -8bps
           RR>                               s  
   5-year  <CZ5YT=    -0.129    -0.027   +031b   -4bps
           RR>                              ps  
           <CZ10YT     0.542    -0.017   +030b   -3bps
 10-year   =RR>                             ps  
 Poland                                               
   2-year  <PL2YT=     1.952     0.031   +269b   +1bps
           RR>                              ps  
   5-year  <PL5YT=     2.926     0.075   +337b   +7bps
           RR>                              ps  
           <PL10YT     3.667     0.095   +342b   +8bps
 10-year   =RR>                             ps  
           FORWARD  RATE      AGREEMENT               
                    3x6       6x9       9x12    3M
                                                interb
                                                ank
 Czech     <CZKFRA      0.29      0.27    0.26       0
 Rep       ><PRIBO                              
           R=>                                  
 Hungary   <HUFFRA      0.51      0.53    0.56    0.55
           ><BUBOR                              
           =>                                   
 Poland    <PLNFRA      1.76     1.765    1.79    1.73
           ><WIBOR                              
           =>                                   
 Note:     are for                                    
 FRA       ask                                  
 quotes    prices                               
 *****************************************************
 *********
 
    

 (Editing by David Goodman)

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