March 16, 2020 / 10:16 AM / 18 days ago

CEE MARKETS-Stocks plunge, central banks in focus as Central Europe shuts doors to fight virus

    By Anita Komuves
    BUDAPEST, March 16 (Reuters) - Central European stock
indexes plunged on Monday, with Budapest's equities leading
losses as markets all over the world faced another tumultuous
day after the U.S. Federal Reserve's emergency rate cut on
Sunday failed to calm investors. 
    Central banks around the world have cut rates and announced
stimulus measures in recent days in order to try to ease the
economic fallout from the spread of the coronavirus.     
    The Fed slashed interest rates to near zero, pledged
hundreds of billions of dollars in asset purchases and
backstopped foreign authorities with the offer of cheap dollar
financing. nL1N2B80FD
    "FX markets in the region had priced in this Fed cut before,
that is why there are no dramatic moves in regional currencies
now," a dealer in Budapest said. 
    Governments across the CEE region introduced more and more
restrictions over the weekend to stop the spread of the virus.
    Poland stopped international flights, Slovakia closed its
borders to foreigners and the government of Hungary shut down
schools starting from Monday. The Czech government on Friday
imposed a ban on foreigners entering the country and Czechs
traveling abroad as of Monday. 
    Budapest's main index was down more than 8% by 0842
GMT with the country's largest bank OTP off more than 7%. 
    Warsaw fell by 7.4%, while Prague was down by
5.9% and Bucharest by 5.6%.
    Regional central bankers sent mixed messages last week about
the need for rate cuts in order to help economies during the
coronavirus pandemic. However, markets are already pricing in
easing, which puts pressure on local currencies.
    The Czech crown led losses in the region by
falling 1.46% on Monday, trading at 26.659 to the euro. 
    The crown has been the hardest hit local currency in recent
weeks as it had been a popular currency for foreign investors to
hold over the last couple of years, and because of growing
expectations of rate cuts in coming weeks. 
    Markets are pricing in about five rate cuts over the next
    CSOB bank said there was a chance the Czech central bank
could cut rates by up to 100 basis points at its March 26
    The bank's analysts said uncertainty will continue to impact
markets. "Markets will only be interested in one thing, how
quickly quarantine measures take effect and the daily rise of
new cases start to drop," CSOB said.
    Czech central bank board member Oldrich Dedek told Reuters
on Friday he was inclined to back an interest rate cut but still
needed to consider by how much. He is the second member of the
seven-person board to back a cut.        
    A third rate-setter, Vojtech Benda, told Seznam Zpravy news
website over the weekend he would not rule out a cut but that he
would assess things at the March 26 meeting, adding rates should
be used with caution.
    Elsewhere in the region, the forint was up 0.2%
and traded at 339.65 to the euro after nearing its record low on
Friday. The Polish zloty was down 0.4% at 4.393 to the
euro while the Romanian leu was steady. 
    The Polish central bank's Monetary Policy Council should
lower borrowing costs now to limit the economic impact of the
coronavirus outbreak, the bank's governor said on Friday.

    The central bank of Hungary holds its weekly FX swap tender
later on Monday. 
    "Suddenly, with the Fed cutting rates so low, the 0.9% base
rate in Hungary seems high," a trader in Budapest said.
    "However, with everything being so volatile and the forint
trading around 340 to the euro, there might be a reason for the
NBH not to accept all bids for FX swaps and to cool the market a
bit," he added.  

                   CEE      SNAPSHO   AT                      
                   MARKETS  T        0942              
                            Latest   Previou  Daily    Change
                            bid      close    change   in 2020
 EURCZK  Czech     <EURCZK  26.6590  26.2700   -1.46%   -4.60%
 =       crown     =>                                  
 EURHUF  Hungary   <EURHUF  339.650  340.290   +0.19%   -2.50%
 =       forint    =>             0        0           
 EURPLN  Polish    <EURPLN   4.3935   4.3751   -0.42%   -3.12%
 =       zloty     =>                                  
 EURRON  Romanian  <EURRON   4.8270   4.8260   -0.02%   -0.80%
 =       leu       =>                                  
 EURHRK  Croatian  <EURHRK   7.5900   7.5701   -0.26%   -1.91%
 =       kuna      =>                                  
 EURRSD  Serbian   <EURRSD  117.620  117.730   +0.09%   -0.04%
 =       dinar     =>             0        0           
         Note:     calculated from            1800            
         daily                                CET      
                            Latest   Previou  Daily    Change
                                     close    change   in 2020
 .PX     Prague              776.34  825.150   -5.92%  -30.41%
 .BUX    Budapest           31366.8  34189.0   -8.25%  -31.93%
                                  5        9           
 .WIG20  Warsaw    <.WIG20  1264.63  1365.97   -7.42%  -41.18%
 .BETI   Buchares           7438.14  7882.19   -5.63%  -25.45%
 .SBITO  Ljubljan  <.SBITO   723.01   762.12   -5.13%  -21.91%
 P       a         P>                                  
 .CRBEX  Zagreb    <.CRBEX  1410.71  1512.15   -6.71%  -30.07%
 .BELEX  Belgrade  <.BELEX   714.24   714.24   +0.00%  -10.91%
 15                15>                                 
 .SOFIX  Sofia     <.SOFIX   442.89   447.95   -1.13%  -22.05%
                            Yield    Yield    Spread   Daily
                            (bid)    change   vs Bund  change
         Czech                                         spread
 CZ2YT=    2-year  <CZ2YT=   1.6630   0.0350   +257bp    +3bps
 RR                RR>                              s  
 CZ5YT=    5-year  <CZ5YT=   1.5070  -0.0080   +229bp    -2bps
 RR                RR>                              s  
 CZ10YT            <CZ10YT   1.1040   0.0000   +168bp    -1bps
 =RR     10-year   =RR>                             s  
 PL2YT=    2-year  <PL2YT=   1.4420   0.0130   +235bp    +0bps
 RR                RR>                              s  
 PL5YT=    5-year  <PL5YT=   1.7450  -0.0520   +252bp    -6bps
 RR                RR>                              s  
 PL10YT            <PL10YT   1.8330   0.0000   +241bp    -1bps
 =RR     10-year   =RR>                             s  
                            3x6      6x9      9x12     3M
         Czech     <CZKFRA     1.83     1.39     1.08     2.31
         Rep       ><PRIBO                             
         Hungary   <HUFFRA     0.64     0.69     0.78     0.66
         Poland    <PLNFRA     1.22     1.12     0.91     1.69
         Note:     are for ask                                
         FRA       prices                              

 (Additional reporting by Jason Hovet in Prague and Alan
Charlish in Warsaw; Editing by Kirsten Donovan)
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