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CEE MARKETS-Forint firms as PMI jumps, labour shortage cuts Czech PMI

* Hungary reports record manufacturing PMI at 62.1, forint jumps

* Polish, Czech PMIs lower than forecast, still show growth

* Czech crown retreats from 3-and-1/2-year high vs euro

* Lower-than-expected Czech PMI points to labour shortage-analyst

BUDAPEST, June 1 (Reuters) - The forint strengthened on Thursday after Hungary's Purchasing Managers' Index (PMI) jumped to a record high in May, underpinning that strong manufacturing growth continues in Central Europe. The index, at 62.1, was well above the 50-point mark which separates contraction and expansion. The Czech and Polish indices, at 56.4 and 52.7, were below expectations but also indicated growth. The PMI data came on the heels of strong first-quarter economic growth data, which showed the emerging eastern economies of the EU outperformed the growth of western peers. The forint firmed 0.3 percent to 307.35 against the euro by 0817 GMT, while the zloty gained 0.1 percent, to trade at 4.1813. The stocks of Hungary's biggest lender, OTP rose other indices in the region dropped. Hungarian government bonds moved sideways, with market interest rates at the short end of the curve hovering near record lows, one Budapest-based trader said. While PMI data help the forint, the debt market usually ignores them as the Hungarian central bank is expected to keep interest rates low for years anyway. "There is no chance for monetary policy tightening at all," the trader said. Polish rate setters have also indicated that they are unlikely to start to reverse years of monetary easing this year, as a pick-up in economic growth leaves inflation moderate.

Wednesday's Polish data, which showed strong first-quarter growth and lower-than-expected May inflation, underpinned optimism over the economy which the PMI figures did nothing to dispel. "The main index is a little bit lower, but it is still relatively high and points to an increase in activity," said Adam Antoniak, senior economist at Bank Pekao. The Czech index, the weakest since January, failed to boost the crown. It eased 0.1 percent against the euro, drifting off 3-and-1/2-year highs hit at 26.335 on Wednesday, disappointing investors sitting on a huge pile of crowns They bought crowns worth tens of billions of euros before the Czech central bank (CNB) removed a cap which had kept the crown weaker than 27 versus the euro. Weaker crown levels increase the odds of a CNB interest rate hike later this year. Analysts said the figures still showed solid growth, while pointing to Central Europe's increasingly painful labour shortage. Czech unemployment is the lowest in the European Union. Many firms complain that the labour shortage holds back growth. Probably that impact pushed the PMI lower, said Komercni Banka analyst Viktor Zeisel. "We expect that it is the worse availability of labour resulting in the necessity to raise wages," he said.

CEE MARKETS SNAPSH AT 1017 CET

OT CURRENCIES

Latest Previo Daily Change

us

bid close change in

2017

Czech crown 26.380 26.362 -0.07% 2.38% 0 5 Hungary 307.35 308.27 +0.30 0.48% forint 00 50 % Polish zloty 4.1813 4.1845 +0.08 5.32%

%

Romanian leu 4.5665 4.5676 +0.02 -0.69%

%

Croatian kuna 7.4130 7.4155 +0.03 1.92%

%

Serbian dinar 122.28 122.40 +0.10 0.88% 00 00 % Note: daily calculated previo close 1800 change from us at CET

STOCKS

Latest Previo Daily Change

us

close change in

2017

Prague 1001.4 1002.3 -0.09% +8.66 5 8 % Budapest 34793. 34551. +0.70 +8.72 54 90 % % Warsaw 2277.5 2281.1 -0.16% +16.9 3 8 2% Bucharest 8769.4 8688.5 +0.93 +23.7 1 0 % 7% Ljubljana 787.28 797.89 -1.33% +9.71

%

Zagreb 1852.2 1864.1 -0.64% -7.15% 1 7 Belgrade 724.11 725.85 -0.24% +0.94

%

Sofia 662.52 661.23 +0.20 +12.9 % 8%

BONDS

Yield Yield Spread Daily (bid) change vs change Bund in Czech spread

Republic

2-year -0.156 0 +056b +0bps

ps

5-year -0.143 0.045 +029b +5bps

ps

10-year 0.669 -0.036 +036b -4bps

ps Poland

2-year 1.927 0.003 +264b +0bps

ps

5-year 2.664 0 +310b +0bps

ps

10-year 3.249 0.029 +294b +2bps

ps

FORWARD RATE AGREEMENT 3x6 6x9 9x12 3M

interb ank

Czech Rep <PR 0.34 0.41 0.48 0

IBOR=>

Hungary <BU 0.19 0.23 0.29 0.15

BOR=>

Poland <WI 1.77 1.775 1.82 1.73

BOR=>

Note: FRA are for ask quotes prices ********************************************************** ****

(Additional reporting by Jason Hovet in Prague and Anna Koper in Warsaw; Editing by Toby Chopra)