October 17, 2018 / 10:10 AM / a month ago

CEE MARKETS-Zloty leads currencies' retreat, equities lose momentum

    * Equities rebound slows
    * Currencies give up some of their recent gains
    * Polish output data confirms slowdown, GDP growth still
strong

    By Sandor Peto
    BUDAPEST, Oct 17 (Reuters) - Central European currencies
gave up some of their recent gains on Wednesday while government
bonds firmed slightly as an equities rebound driven by global
trends also lost some steam.
    Regional stock indices tracked a continuing strengthening in
Asian shares after Wall Street was boosted by earnings reports
from some U.S. companies.
    Optimism was tempered by clouds over the German economy, the
region's key trade partner, and a cautious retreat for German
shares after two days of gains.
    Budapest's main stock index rose by a third of a
percent by 0850 GMT, set a four-month high and tested five-month
peaks, with OTP Bank and drugmaker Richter
shares hovering near key technical levels.
    OTP has been driven back several times from the 10,300
forint levels in the past months, while Richter has struggled to
break through the 5,400 forint line, Erste analysts wrote. 
    Bucharest shed 0.1 percent after getting close to a
five-month high in early trade. 
    Warsaw's blue-chip index rose half a percent,
returning to levels last seen before it dropped to three-month
lows a week ago as global stocks were plunging. 
    Currencies and government bond yields failed to receive
support from Polish industrial output data for September, which
came in  weaker than expected.
    Annual output growth slowed to 2.8 percent from 5 percent in
August, below analysts' 4.3 percent forecast.    
    Wage and employment figures released on Tuesday also
confirmed a slowdown in Poland's robust economic growth,
analysts said.
    The zloty led a retreat of regional currencies
after a rise in the previous three sessions, easing by 0.2
percent to 4.2935 versus the euro. The forint and the
Czech crown shed 0.1 percent.
    "I would say the figures did not influence the zloty," one
Warsaw-based dealer said. "It is in very narrow ranges ... and
it is firmer than last week's levels beyond 4.3."
    The latest Polish economic figures confirmed that the
central bank is unlikely to change its loose policy stance any
time soon. 
    The trend shown by a 2.9 percent rise in Polish producer
prices in September suggests "limited space for increase of
inflationary pressure", Erste Group analyst Katarzyna
Rzentarzewska said in a note.
    But Poland's economic growth, which earned a credit rating
upgrade from Standard & Poor's last Friday, is expected to
remain strong.
    The World Bank on Wednesday increased its forecast for
Poland's growth this year to 4.7 percent from 4.2 percent.

    The data was supportive for Polish government bonds.
    The yield on 10-year paper shed 1 basis point to 3.192
percent by 0923 GMT, in line with a drop in the corresponding
Bund yield, after euro zone inflation figures matched
expectations.
    
            CEE       SNAPSHOT   AT                         
            MARKETS             1050 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.8550   25.8220    -0.13%    -1.21%
 crown      >                                       
 Hungary    <EURHUF=  322.1900  321.8500    -0.11%    -3.50%
 forint     >                                       
 Polish     <EURPLN=    4.2935    4.2855    -0.19%    -2.73%
 zloty      >                                       
 Romanian   <EURRON=    4.6685    4.6666    -0.04%    +0.24%
 leu        >                                       
 Croatian   <EURHRK=    7.4150    7.4153    +0.00%    +0.21%
 kuna       >                                       
 Serbian    <EURRSD=  118.1800  118.1600    -0.02%    +0.27%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1096.46  1088.440    +0.74%    +1.70%
                                       0            
 Budapest             37578.34  37445.67    +0.35%    -4.57%
 Warsaw                2226.95   2216.80    +0.46%    -9.52%
 Bucharest             8551.40   8560.32    -0.10%   +10.29%
 Ljubljana  <.SBITOP    811.01    818.27    -0.89%    +0.57%
            >                                       
 Zagreb                1780.62   1776.55    +0.23%    -3.38%
 Belgrade   <.BELEX1    733.68    731.14    +0.35%    -3.44%
            5>                                      
 Sofia                  609.60    609.51    +0.01%   -10.02%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    1.5550   -0.0080   +216bps     +0bps
            R>                                      
   5-year   <CZ5YT=R    1.8570   -0.0080   +197bps     +0bps
            R>                                      
   10-year  <CZ10YT=    2.1690   -0.0110   +169bps     +0bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.5600   -0.0040   +217bps     +1bps
            R>                                      
   5-year   <PL5YT=R    2.5140   -0.0100   +263bps     +0bps
            R>                                      
   10-year  <PL10YT=    3.2120   -0.0200   +274bps     -1bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                2.05      2.24      2.37      1.76
            <PRIBOR=                                
            >                                       
 Hungary                  0.43      0.74      1.10      0.17
                                                    
 Poland                   1.77      1.79      1.86      1.72
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 *************************************************          
 *************                                      
 
    
 (Reporting by Sandor Peto
Editing by David Goodman)
  
 
 
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