December 7, 2021

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CEE MARKETS-Assets firm on optimism over economies opening, eye on Hungarian cbank meeting

By Anita Komuves BUDAPEST, April 27 (Reuters) – Central European stocks and currencies firmed on Monday, boosted by a risk-on mood in global markets with the ECB expecting to widen its stimulus package later this week and the Bank of Japan pledging to buy unlimited amounts of government bonds. The prospect of a gradual easing of coronavirus lockdown measures to restart economic activity in several European countries also lifted investor sentiment. Stock markets in Budapest, Prague and Warsaw were all up more than 1% by 0758 GMT on Monday, with Budapest leading regional gains. Although both the Fed and the ECB have rate-setting meetings this week, analysts at CIB Bank in Budapest said they anticipated no major announcements as central banks could wait until they can assess the effects of their measures so far. “Most probably the ECB will raise the limit on one of its programs and will stress the importance of fiscal policy,” they added in a note. The National Bank of Hungary holds a rate-setting meeting on Tuesday. A Reuters poll last week showed analysts expect the bank to leave its key rates unchanged after a surprise increase in lending rates early this month. On Tuesday the NBH will decide about the scale and terms of its planned asset-purchasing programme, which investors will eye closely. Hungary’s economic contraction this year is likely to be deeper than the government’s 3% projection last month and the budget deficit could widen above 3% per GDP, Finance Minister Mihaly Varga told Reuters on Friday. The forint firmed 0.65% and was trading at 353.80 to the euro on Monday, well above the record low near 370 versus the euro that it hit on April 1. “The forint is buoyed by the general risk-on mood in global markets, everyone is happy about the prospect of opening up business activity,” a Budapest-based trader said. “There is no clear direction, however. Investors are waiting, looking for new ideas and hoping for more good news.” Elsewhere, the Polish zloty was up 0.46% while the Czech crown strengthened 0.58%. In Romania, both the stock market and the leu firmed even though on Friday, Moody’s followed S&P and Fitch to revise Romania’s rating outlook from stable to negative due to concerns over the public deficit. All three agencies now rate Romania on their lowest investment grades. “The news is hardly any surprise and Romania’s Eurobonds are already traded one notch lower than the actual rating would suggest, so we project nil reaction on the market today,” Raiffeisen said in a note, adding that Romania had avoided an outright ratings downgrade. “The leu is moving in line with the region albeit at a slower pace,” a trader in Bucharest said. Before the pandemic, Romania was targeting a deficit of 3.6% of GDP this year. With the damage from the coronavirus outbreak, the government estimates the deficit will reach 6.7% in 2020. “Risk of a downgrade to junk rating by the end of this year is significant,” Romanian bank BCR said in a research note. CEE SNAPSHOT AT MARKETS 0958 CET CURRENCIE S Latest Previous Daily Change bid close change in 2020 Czech 27.1050 27.2620 +0.58% -6.17% crown Hungary 353.8000 356.0900 +0.65% -6.40% forint Polish 4.5187 4.5393 +0.46% -5.80% zloty Romanian 4.8380 4.8401 +0.04% -1.03% leu Croatian 7.5500 7.5535 +0.05% -1.39% kuna Serbian 117.5900 117.6500 +0.05% -0.02% dinar Note: calculated from 1800 CET daily change Latest Previous Daily Change close change in 2020 Prague 860.53 851.9100 +1.01% -22.87% Budapest 33434.53 32964.67 +1.43% -27.45% Warsaw 1619.20 1601.91 +1.08% -24.69% Bucharest 7952.16 7917.72 +0.43% -20.30% Ljubljana 773.49 773.49 +0.00% -16.46% Zagreb 1568.29 1565.02 +0.21% -22.26% Belgrade <.BELEX15 677.30 676.38 +0.14% -15.52% > Sofia 450.25 448.61 +0.37% -20.75% Yield Yield Spread Daily (bid) change vs Bund change in Czech spread Republic 2-year <CZ2YT=RR 0.7150 0.0150 +141bps +1bps > 5-year <CZ5YT=RR 0.9020 -0.1740 +157bps -18bps > 10-year <CZ10YT=R 1.3580 0.0690 +183bps +8bps R> Poland 2-year <PL2YT=RR 0.6010 -0.0070 +130bps -2bps > 5-year <PL5YT=RR 0.9690 -0.0280 +163bps -3bps > 10-year <PL10YT=R 1.3540 -0.0190 +183bps -1bps R> FORWARD 3×6 6×9 9×12 3M interban k Czech Rep < 0.27 0.30 0.33 0.91 PRIBOR=> Hungary < 1.21 1.14 1.09 1.10 BUBOR=> Poland < 0.28 0.25 0.25 0.69 WIBOR=> Note: FRA are for ask prices quotes *************************************************** *********** (Additional reporting by Luiza Ilie in Bucharest Editing by Mark Heinrich)

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