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CEE MARKETS-Fx, stocks retreat on Korea, economies remain supportive
August 29, 2017 / 9:36 AM / in 3 months

CEE MARKETS-Fx, stocks retreat on Korea, economies remain supportive

    * Budapest, Warsaw retreat after strong gains on Korean
    * Zloty, forint lead easing of currencies
    * Economic data could fuel optimism, Hungarian central bank

    By Sandor Peto
    BUDAPEST, Aug 29 (Reuters) - Central European stocks and
currencies eased on Tuesday as risk aversion gripped global
markets after a new missile test by North Korea reignited
concerns over its tense relations with the United States.
    In equities markets, Budapest and Warsaw led the decline
after recent strong gains.
    Budapest's main index shed 1.8 percent by 0854 GMT,
off a new record high set on Monday. 
    Warsaw's bluechip index fell 1.3 percent,
retreating from a 28-month high in the previous session, led by
a fall in the shares of BZ WBK. The bank's stocks
reached its highest level since April 2015 on Monday.
    The zloty shed almost half a percent against the
euro to trade at 4.2655, off four-week highs set on Monday.
    The zloty and the forint were buoyed in the past weeks by
macroeconomic figures which showed robust growth in Central
    The upbeat figures have not led to a hawkish turn in
monetary policy in Hungary and Poland unlike in the Czech
Republic where the central bank early this month launched the
European Union's first rate hike in more than five years.
    Hungary's central bank (NBH) even flagged more easing via
its unconventional tools last week, knocking down the forint
from 28-month highs at 301.72 on Thursday.
    S&P lifted the outlook on Hungary's sovereign rating to
positive from stable late on Friday, but after the NBH comments
the forint has been unable to benefit from the change.
    On Tuesday it eased 0.2 percent to 304.84.
    The jury is out on how it will behave after manufacturing
sector activity (PMI) data due in the region's main countries on
Friday, which may confirm robust growth.
    "Hungarian PMI data are less indicative as elsewhere. Their 
strong levels in the past months did not correlate with
industrial output," said Gergely Urmossy, analyst of Erste group
in Budapest.
    "If the figures still lift the forint, it will happen
through an improved regional sentiment," he said, adding that he
expected the forint to continue to retreat in the longer term.
     Before Tuesday's bout of risk aversion, regional assets
were also buoyed by a meeting of central bankers in Jackson Hole
on Friday which did not show a drift towards more hawkish
monetary policies in the United States and the euro zone.
    The dollar's slide also supports regional currencies and
government bonds.
    Bond yields shed 1-2 basis points in Poland and 2-3 basis
points in Hungary. Bonds bucked the trend in Romania where
concerns over a rising budget deficit persist.
               CEE MARKETS  SNAPSH   AT  1054 CET         
                            Latest  Previo  Daily   Change
                            bid     close   change  in
 Czech crown                26.111  26.101  -0.04%   3.43%
                                 0       0          
 Hungary                    304.84  304.29  -0.18%   1.31%
 forint                         00      00          
 Polish zloty               4.2655  4.2468  -0.44%   3.24%
 Romanian leu               4.6032  4.5980  -0.11%  -1.48%
 Croatian                   7.4117  7.4143   +0.04   1.93%
 kuna                                            %  
 Serbian                    118.97  119.10   +0.11   3.68%
 dinar                          00      00       %  
 Note: daily   calculated   previo  close   1800          
 change        from         us      at      CET     
                            Latest  Previo  Daily   Change
                                    close   change  in
 Prague                     1025.4  1035.9  -1.01%   +11.2
                                 7       1              7%
 Budapest                   37427.  38097.  -1.76%   +16.9
                                55      59              5%
 Warsaw                     2497.7  2531.3  -1.33%   +28.2
                                 1       1              2%
 Bucharest                  8296.8  8363.1  -0.79%   +17.1
                                 7       4              0%
 Ljubljana                  825.56  824.53   +0.12   +15.0
                                                 %      5%
 Zagreb                     1895.4  1899.5  -0.22%  -4.98%
                                 0       0          
 Belgrade                   720.46  724.75  -0.59%   +0.43
 Sofia                      714.51  713.94   +0.08   +21.8
                                                 %      4%
                            Yield   Yield   Spread  Daily
                            (bid)   change  vs      change
                                            Bund    in
 Czech                                              spread
   2-year                   -0.016       0   +075b   +1bps
   5-year                    0.069   0.051   +044b   +9bps
   10-year                   0.899   0.015   +057b   +6bps
   2-year                    1.726  -0.007   +249b   +1bps
   5-year                    2.599  -0.021   +297b   +2bps
   10-year                   3.279   0.009   +295b   +6bps
               FORWARD      RATE    AGREEMENT             
                            3x6     6x9     9x12    3M
 Czech Rep             <PR     0.6     0.7    0.79       0
 Hungary               <BU    0.21   0.225   0.255    0.15
 Poland                <WI   1.763   1.783   1.825    1.73
 Note: FRA     are for ask                                
 quotes        prices                               
 (Additional reporting by Luiza Ilie in Bucharest/Bartosz
Chmielewski in Warsaw; Editing by Richard Balmforth)

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