November 14, 2018 / 11:31 AM / a month ago

CORRECTED-CEE MARKETS-Currencies ease after robust economic growth spurs inflation concerns

 (Replaces graphic using correct German data series)
    * Q3 GDP growth faster than expected in CEE, except Czech
Republic
    * Weak German GDP data might mean looser policies in
CEE-analysts
    * Budapest, Warsaw stocks reverse early falls
    * O2 stock weighs on Prague

    By Sandor Peto and Alicja Ptak
    BUDAPEST/WARSAW, Nov 14 (Reuters) - Central European
currencies eased on Wednesday as robust economic growth data
from the region highlighted inflation concerns which central
banks are unlikely to rush to tackle, given a contraction in
Germany, the region's largest trade partner.
     Cautious international sentiment also weighed on the
region's currencies and stocks, market participants said.
     The zloty eased 0.1 percent to 4.1945 versus the
euro by 1001 GMT, even though third-quarter economic output data
released on Wednesday showed robust 5.1 percent annual growth, a
steady rate from the second quarter.
    Analysts had forecast 4.7 percent growth after other
economic indicators seemed to predict a slowdown in the region.
    Data from Hungary, Romania and Slovakia showing growth of
4-5 percent were also better than expected.    
    Only the Czechs reported lower-than-expected growth at 2.3
percent.    
    That was more in synch with a bigger-than forecast slowdown
in Germany, the region's key trade partner.
    Germany's economy contracted for the first time since 2015
in the third quarter as global trade disputes and problems in
the auto industry hit exports.
    The crown briefly touched a 4-month low against
the euro of 25.98 just after the data was released. 
    The four straight rate hikes delivered by the Czech central
bank (CNB) at its latest meetings have failed to strengthen the
crown as investors focused on the dollar's continuing strength
rather than local factors in the past months.
    The Czech growth figures left expectations unchanged that
the CNB will increase interest rates further, particularly if
the crown does not strengthen, analysts said.
    Weak German data might, however, lead to a delay in rate
tightening by the European Central Bank and that could also make
central banks overly relaxed in the eastern members of the EU,
Budapest-based ING analyst Peter Virovacz said.
    "I do not expect any move from the NBH (National Bank of
Hungary), while I fear that there will be a big (upside)
surprise in inflation next year, and the bank will react too
late," he said.
    Orsolya Nyeste, analyst of Erste in Budapest said in a note
that "monetary policy should change its current extremely loose
stance in the near future in order to avoid overheating of the
economy."
    The forint was steady at 322.99 versus the euro.
    Stock indices in Budapest and Warsaw
reversed an early decline which tracked a global trend caused by
growth concerns in China and Germany.
    Prague's index was kept flat by a 4 percent decline in
shares of telecom group O2, after MSCI dropped the
stock from its Czech country index as of Nov. 30. 
    
            CEE       SNAPSHOT   AT                         
            MARKETS             1101 CET            
                      CURRENCI                              
                      ES                            
                      Latest    Previous  Daily     Change
                      bid       close     change    in 2018
 Czech      <EURCZK=   25.9700   25.9550    -0.06%    -1.65%
 crown      >                                       
 Hungary    <EURHUF=  322.9900  323.0000    +0.00%    -3.74%
 forint     >                                       
 Polish     <EURPLN=    4.2945    4.2885    -0.14%    -2.75%
 zloty      >                                       
 Romanian   <EURRON=    4.6585    4.6575    -0.02%    +0.46%
 leu        >                                       
 Croatian   <EURHRK=    7.4200    7.4220    +0.03%    +0.14%
 kuna       >                                       
 Serbian    <EURRSD=  118.1200  118.3300    +0.18%    +0.32%
 dinar      >                                       
 Note:      calculated from               1800 CET          
 daily                                              
 change                                             
                                                            
                      Latest    Previous  Daily     Change
                                close     change    in 2018
 Prague                1078.88  1078.810    +0.01%    +0.07%
                                       0            
 Budapest             38442.06  38252.65    +0.50%    -2.38%
 Warsaw                2214.65   2217.97    -0.15%   -10.02%
 Bucharest             8586.93   8670.05    -0.96%   +10.75%
 Ljubljana  <.SBITOP    811.53    810.75    +0.10%    +0.64%
            >                                       
 Zagreb                1753.37   1760.60    -0.41%    -4.86%
 Belgrade   <.BELEX1    749.74    749.30    +0.06%    -1.32%
            5>                                      
 Sofia                  593.16    593.86    -0.12%   -12.44%
                      BONDS                                 
                      Yield     Yield     Spread    Daily
                      (bid)     change    vs Bund   change
                                                    in
 Czech                                              spread
 Republic                                           
   2-year   <CZ2YT=R    1.4840    0.0510   +212bps     +5bps
            R>                                      
   5-year   <CZ5YT=R    1.8270    0.0030   +202bps     +2bps
            R>                                      
   10-year  <CZ10YT=    2.1040   -0.0060   +171bps     +1bps
            RR>                                     
 Poland                                                     
   2-year   <PL2YT=R    1.5860    0.0070   +222bps     +1bps
            R>                                      
   5-year   <PL5YT=R    2.4600    0.0020   +265bps     +2bps
            R>                                      
   10-year  <PL10YT=    3.2260    0.0060   +283bps     +2bps
            RR>                                     
            FORWARD   RATE      AGREEMEN                    
                                T                   
                      3x6       6x9       9x12      3M
                                                    interban
                                                    k
 Czech Rep                2.05      2.20      2.46      1.99
            <PRIBOR=                                
            >                                       
 Hungary                  0.37      0.66      1.02      0.15
                                                    
 Poland                   1.76      1.80      1.88      1.72
                                                    
 Note: FRA  are for ask prices                              
 quotes                                             
 *************************************************          
 *************                                      
 
    
 (Reporting by Sandor Peto
Editing by Alexandra Hudson)
  
 
 
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