March 5, 2018 / 11:05 AM / 16 days ago

CEE MARKETS-Stocks, currencies rebound, shrugging off Italian vote

    * Budapest, Warsaw stocks off multi-month lows, currencies
    * German coalition deal helps, Italian vote less significant
    * Slovak markets steady even though government is shaken

    By Sandor Peto and Tatiana Jancarikova
    BUDAPEST, March 5 (Reuters) - Central European stocks and
currencies rebounded on Monday after Germany's Social Democrats
voted to join a government coalition, removing a major political
risk in the European Union's biggest economy.
    Uncertainty in Italy after Sunday's inconclusive general
election weighed on nerves but had little affect on the
euro-dollar cross closely watched in the EU's eastern markets.
    "Shaky situations in Italian politics are not rare," said
Monika Kiss, an analyst of Equilor brokerage in Budapest. "The
nightmare scenarios, like no government in Germany or big
far-right win in Italy, are out of the way."
    In Slovakia, government bonds were steady, even though on
Sunday the country's president urged changes in the government
or early elections following the murder of an investigative
journalist that has shaken the nation.
    Political developments rarely move markets in most of
Central Europe, and it remained uncertain if the scandal will
lead to the fall of the government. 
    Most currencies in the region strengthened against the euro.
The zloty led them, gaining 0.11 percent to 4.1885 by
0985 GMT.
    The zloty was off Friday's three-week lows at 4.2 to the
euro, even though the Polish central bank is expected to leave
interest rates at record lows at its meeting on Wednesday and is
unlikely to shift towards a hawkish stance.
    "We expect an unchanged neutral MPC (central bank) stance in
Poland with fresh NBP macro projections supporting our base case
scenario of stable rates during the whole year of 2018,"
Raiffeisen said in a note.
    Budapest's and Warsaw's main stock indexes rebounded from
multi-month lows. Budapest led a rise, gaining 0.9 percent.
    It was driven by an almost 3 percent rise in pharmaceuticals
maker Richter. Analysts said technical factors led to
a rebound from around 5,500 forints ($21.64), after a decline
last week as it cut its sales target for a key product
    The forint gained slightly and Hungarian bonds were steady.
    "The political super Sunday is over, and there has been no
fireworks," one Budapest-based currency dealer said, adding that
the week will abound in key events to watch, including the
European Central Bank's meeting and key U.S. economic data. 
    Hungarian inflation figures due on Thursday are unlikely to
change the Hungarian central bank's loose policy stance, a fixed
income trader said.
    Romania's leu eased slightly versus the euro, but
is unlikely to break out of its recent range of 4.65-4.67
despite some political noise before the ruling party's congress
on Saturday, ING analysts said in a note.
            CEE       SNAPSHOT   AT                         
            MARKETS             1108 CET            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.3700   25.3790    +0.04%    +0.68%
 crown      >                                       
 Hungary    <EURHUF=  313.6900  313.8000    +0.04%    -0.88%
 forint     >                                       
 Polish     <EURPLN=    4.1885    4.1930    +0.11%    -0.29%
 zloty      >                                       
 Romanian   <EURRON=    4.6609    4.6595    -0.03%    +0.40%
 leu        >                                       
 Croatian   <EURHRK=    7.4350    7.4395    +0.06%    -0.06%
 kuna       >                                       
 Serbian    <EURRSD=  117.9900  118.0000    +0.01%    +0.43%
 dinar      >                                       
 Note:      calculated from               1800 CET          
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1112.08  1106.020    +0.55%    +3.15%
 Budapest             37268.94  36939.18    +0.89%    -5.35%
 Warsaw                2324.53   2314.23    +0.45%    -5.55%
 Bucharest             8367.45   8352.22    +0.18%    +7.92%
 Ljubljana  <.SBITOP    806.39    810.01    -0.45%    +0.00%
 Zagreb                1857.63   1850.05    +0.41%    +0.80%
 Belgrade   <.BELEX1    746.44    747.85    -0.19%    -1.76%
 Sofia                  683.12    683.12    +0.00%    +0.84%
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
 Czech                                              spread
   2-year   <CZ2YT=R    0.8800    0.0550   +143bps     +6bps
   5-year   <CZ5YT=R    1.2350   -0.0090   +123bps     +0bps
   10-year  <CZ10YT=    1.9140   -0.0100   +128bps     +0bps
   2-year   <PL2YT=R    1.6530    0.0100   +220bps     +2bps
   5-year   <PL5YT=R    2.5450    0.0120   +254bps     +2bps
   10-year  <PL10YT=    3.2990    0.0230   +266bps     +3bps
            FORWARD   RATE      AGREEMEN                    
                      3x6       6x9       9x12      3M
 Czech Rep                0.98      1.09      1.23      0.91
 Hungary                  0.08      0.11      0.19      0.02
 Poland                   1.76      1.77      1.84      1.72
 Note: FRA  are for ask prices                              

($1 = 254.2100 forints)

 (Additional reporting by Radu Marinas in Bucharest, editing by
Larry King)
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