Prague stocks set for biggest loss since 2020 as Ukraine tensions hit

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BUDAPEST/PRAGUE, Feb 21 (Reuters) - Prague stocks were set for their biggest one-day loss since the end of 2020, and other central European bourses also fell with global markets amid persisting tensions around Ukraine, although most currencies held on to gains with rate hike expectations lending support.

Prague's equities (.PX) were down 2.17% by 1453 GMT while Warsaw (.WIG20) lost 2.94%. Budapest (.BUX) was 2.62% lower, while Bucharest (.BETI) slid 1.24%.

Central Europe's stock markets were under pressure from the start on Monday, with lower liquidity in Prague leading to losses, traders said, even amid optimism over Ukraine.

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Russian troops have been massing around Ukraine's borders, prompting Western fears of an invasion that Moscow has denied.

News that U.S. President Joe Biden and Russian President Vladimir Putin had agreed in principle to hold a summit on the crisis had lifted sentiment earlier on Monday but that soon faded, sending stocks down and accelerating losses in central Europe. read more

Currencies fared better but have been volatile due to tensions in Eastern Europe over the past weeks, although they remain near 2022 highs.

With markets looking to a further interest rate hike in Hungary on Tuesday, the forint held early gains and led the region on Monday, rising 0.35% to 356.54 per euro. It has added 3.6% since the start of the year.

"Tomorrow's rate hike is taken for granted by investors, so it won't really move the forint," an FX trader in Budapest said.

"If the central bank raised the base rate by more than 50 basis points, that would be positive for the currency, but I do not see a big chance for that."

In Poland, the zloty edged down 0.04% to 4.5329 per euro.

Strong retail data on Monday, combined with robust industrial output figures last week, backed bets for further rate hikes.

"Overall, this all adds up for us to an environment in which the Monetary Policy Council (MPC) will continue to tighten monetary policy. We expect the main interest rate to be raised by 50 basis points in March," Adam Antoniak, senior economist at ING Bank Slaski, said

Among other trade, the Czech crown eased up 0.21%, while the Romanian leu was flat.

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Additional reporting by Jason Hovet in Prague and Alicja Ptak and Alan Charlish in Warsaw; Editing by Devika Syamnath and Alex Richardson

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