March 12, 2020 / 2:18 PM / a month ago

CEE MARKETS-Stocks, currencies extend losses after ECB, Budapest index tumbles over 10%

 (Updates markets after ECB, adds fresh comment, Romania bond
    By Krisztina Than
    BUDAPEST, March 12 (Reuters) - Central European stock
markets extended losses on Thursday led by a 10.5% fall in
Budapest, and currencies also fell as the ECB's stimulus
measures failed to put a floor under markets as investors fret
over the impacts of the spreading coronavirus.
    Markets had opened at multi-year lows on Thursday after U.S.
President Donald Trump imposed strict limits on travel from
Europe, and players had been looking to the meeting of the
European Central Bank (ECB) for rays of hope.
    The ECB approved fresh stimulus measures to help the ailing
euro zone economy cope with the shock of the coronavirus
pandemic, but unexpectedly kept interest rates on hold.

    "So far the ECB decision had no impact ... the market is
quite in disarray," a dealer in Budapest said. "It is hard to
say which way we will go in the next days. If the situation
worsens and the number of fresh infections rises that could also
impact the forint."
     The region's currencies extended losses, with the Czech
crown losing the most, 1.7%, as markets weighed
whether the central bank would reverse its recent interest rate
tightening as the economy comes under strain.
    The forint was also down 0.7%, but still clear of its
all-time low past 340 per euro hit in February.
    "EUR/CZK has been or may be still is a very crowded trade,
so it is now under biggest pressure from CEE3, and of course
(there is) a lot of space for cutting rates as well, even if
this is probably not an imminent threat," a dealer said.
    Hungary scrapped a 10-year and 20-year bond auction on
Thursday and sold less than planned of five-year bonds as bids
dwindled amid high volatility and uncertainty in markets.
    "The forint has started to weaken and yields climbed upwards
today," a Budapest dealer said, adding that overnight interbank
rates also ticked upwards.
    "If we look at this bond auction positively then we can say
the debt agency can afford not accepting bids, and if we look at
this negatively then this auction has failed," he said.
    Hungary sold 17 billion forints ($56.5 million) worth of
five-year bonds, below its 20 billion offer and significantly
less than the original 60 billion forints the tenders intended
to raise.
    Romania rejected all bids at a treasury bond tender.
    Warsaw's blue-chip index slumped 10% to its lowest since
mid-2009. The Prague index fell more than 5% to its lowest
since July 2016. 
    Shares of Central Europe's largest independent bank, OTP
Bank, plunged more than 16% below the 10,000 forints
threshold before regaining some ground, and then resumed losses
to trade at 10,050 forints, down 15% at 1354 GMT. Shares of
Polish bank Pekao also fell 15%.
    "The volatility of zloty and forint exchange rates shot up
and stock markets in Poland and Hungary were battered amid fresh
fears of virus spread, which led to both countries declaring
states of emergency and suspending key economic activities,"
Commerzbank said in a note.
    The Czech Republic was also introducing controls on its
borders with Germany and Austria and banning crossings away from
official frontier border posts to help fight the spread of the
coronavirus, Interior Minister Jan Hamacek said on Wednesday.

    Hungary on Wednesday banned inbound travel from Italy, South
Korea, Iran and China for non-Hungarians in response to the
coronavirus outbreak.
    Analysts were increasingly drawing parallels with the 2008
global financial crisis and assessing the expected economic
fallout globally.
    "In CEE FX, all currencies depreciated against the EUR,"
Morgan Stanley said. 
    "Hungary was the only country in CEE where the market did
not imply easing but that is no longer the case after Wednesday.
Moreover, the government declared a state of emergency due to
Covid-19, shutting universities and restricting travel from
certain countries."
    Romanian lawmakers meet late on Thursday to decide whether
to give their vote of confidence to designated Prime Minister
Florin Citu's government. 
    Citu's minority Liberal Party has been trying to trigger
early elections. His cabinet was initially expected to lose the
vote, but chances for a positive vote have increased as the
spread of coronavirus cases has heightened the need for
political stability rather than upheaval.
            CEE        SNAPSHOT    AT                         
            MARKETS               1439 CET            
                       Latest     Previous  Daily     Change
                       bid        close     change    in 2020
 Czech                   26.1990   25.7600    -1.68%    -2.93%
 Hungary                338.6000  336.2500    -0.69%    -2.20%
 Polish                   4.3646    4.3162    -1.11%    -2.48%
 Romanian                 4.8220    4.8189    -0.06%    -0.70%
 Croatian                 7.6090    7.5755    -0.44%    -2.15%
 Serbian                117.7000  117.6300    -0.06%    -0.11%
 Note:      calculated from                 1800 CET          
                       Latest     Previous  Daily     Change
                                  close     change    in 2020
 Prague                   825.06  885.1000    -6.78%   -26.05%
 Budapest               32894.81  36536.24    -9.97%   -28.62%
 Warsaw                  1356.66   1505.64    -9.89%   -36.90%
 Bucharest               7724.35   8381.47    -7.84%   -22.58%
 Ljubljana                757.77    827.84    -8.46%   -18.16%
 Zagreb                  1429.47   1591.42   -10.18%   -29.14%
 Belgrade   <.BELEX15     726.17    752.28    -3.47%    -9.42%
 Sofia                    458.10    495.12    -7.48%   -19.37%
                       Yield      Yield     Spread    Daily
                       (bid)      change    vs Bund   change
 Czech                                                spread
   2-year   <CZ2YT=RR     1.6390   -0.2040   +255bps    -26bps
   5-year   <CZ5YT=RR     1.3760    0.2380   +223bps    +18bps
   10-year  <CZ10YT=R     1.1040   -0.0280   +183bps     -6bps
   2-year   <PL2YT=RR     1.3480    0.1150   +225bps     +6bps
   5-year   <PL5YT=RR     1.7570    0.2740   +261bps    +21bps
   10-year  <PL10YT=R     1.8330    0.1200   +255bps     +9bps
                       3x6        6x9       9x12      3M
 Czech Rep          <       1.82      1.38      1.06      2.33
 Hungary            <       0.58      0.59      0.66      0.66
 Poland             <       1.30      1.05      1.01      1.69
 Note: FRA  are for ask prices                                
($1 = 301.0500 forints)

 (Additional reporting by Jason Hovet and Alan Charlish; Editing
by Larry King, Susan Fenton and Alex Richardson)
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