October 22, 2018 / 11:38 AM / 10 months ago

CEE MARKETS-FX, stocks higher after Italy relief

    * FX, stocks gain on Italy relief 
    * Polish regional elections disappoint ruling party

    PRAGUE, Oct 22 (Reuters) - Central European currencies
headed higher on Monday as markets took some relief from Italy
retaining a stable outlook from Moody's ratings agency after an
expected downgrade.
    Stock markets in the region also rallied, led by a 0.3
percent rise for Prague. Budapest markets were closed for
a holiday though the forint gained 0.1 percent to
323.00 to the euro in trading.
    Investors had worried that Moody's would not only downgrade
Italy's sovereign rating to Baa3 - the lowest investment grade -
but also set the outlook at "negative", increasing the risk of a
junk rating for the euro zone's third largest economy.
    With central Europe tightly integrated economically and
investors watching for any market effects from Italy's tensions
with the European Union over Rome's expansionary budget
spending, the region was able to gain some ground.
    The Czech crown was out front with a 0.2 percent
rise to 25.832 to the euro at 1031 GMT, while Poland's zloty
 added 0.1 percent to 4.292.
    "The crown is more market-driven rather than reacting to
fundamentals at the moment," a Prague-based trader said.
    In Poland, investors digested regional elections over the
weekend in which exit polls showed the ruling eurosceptic Law
and Justice (PiS) party posted limited gains but lost a
high-profile race for Warsaw mayor.
    The result did not have a major impact on the market but may
be felt later in the government's fiscal policy, increasing
chances of a rise in spending down the line, analysts said.
    "We see local election results as neutral for the FX and
bond market," Erste Group Bank analysts said in a note.
    "Ahead of parliamentary elections we may see further
increase in social benefits as was the case in local
elections...especially if the ruling party considers the local
elections result as disappointing."
                       CEE         SNAPSHOT    AT  1231                  
                       MARKETS                CET                 
                                   Latest     Previous   Daily    Change
                                   bid        close      change   in 2018
 EURCZK=    Czech                    25.8320    25.8705   +0.15%   -1.12%
 EURHUF=    Hungary                 323.0000   323.3950   +0.12%   -3.74%
 EURPLN=    Polish                    4.2920     4.2973   +0.12%   -2.69%
 EURRON=    Romanian                  4.6670     4.6684   +0.03%   +0.27%
 EURHRK=    Croatian                  7.4310     7.4329   +0.03%   -0.01%
 EURRSD=    Serbian                 118.4000   118.4500   +0.04%   +0.08%
            Note:      calculated from                   1800            
            daily                                        CET      
                                   Latest     Previous   Daily    Change
                                              close      change   in 2018
 .PX        Prague                   1083.00  1079.3000   +0.34%   +0.45%
 .BUX       Budapest                37185.93   37185.93   +0.00%   -5.57%
 .WIG20     Warsaw                   2199.85    2196.99   +0.13%  -10.62%
 .BETI      Bucharest                8604.37    8600.27   +0.05%   +10.97
 .SBITOP    Ljubljana                 815.64     813.05   +0.32%   +1.15%
 .CRBEX     Zagreb                   1783.04    1774.64   +0.47%   -3.25%
 .BELEX15   Belgrade                  739.45     738.95   +0.07%   -2.68%
 .SOFIX     Sofia                     608.80     608.18   +0.10%  -10.13%
 (Reporting by Robert Muller, Jason Hovet and Marcin Goclowski
Editing by Mark Heinrich)
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