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CEE MARKETS-Risk aversion weakens stocks, forint; Czech assets resist

* Fitch outlook lift helps crown, Czech assets buck risk aversion

* Robust growth figures support central European markets

* Hungary cbank minutes, CPI data, eyed for policy guidance

BUDAPEST, Sept 4 (Reuters) - An upgrade in the sovereign rating outlook from Fitch helped Czech assets on Monday buck a decline in other Central European markets as risk aversion gripped investors after a nuclear test in North Korea. Sunday's test of what Pyongyang said was an advanced hydrogen bomb for a long-range missile prompted the United States to warn of a "massive" military response if it or allies were threatened and triggered a global flight to safer assets. That also affected Central Europe on Monday although recent robust economic figures from the region, where markets shook off tensions over North Korea last month, continue to be supportive of local assets. Credit rating agency Fitch late on Friday revised its outlook on the Czech Republic's 'A+' rating to positive from stable, citing a marked improvement in the country's fiscal balances. Prague stocks were steady on Monday, while Budapest's main index shed 0.6 percent, Bucharest 0.5 percent and Warsaw 0.2 percent by 0936. The crown was a shade firmer, at 26.055 against the euro. The currency was also being helped by last week's figures showing a record three-month rise in economic growth in the second quarter and expectations that the Czech central bank (CNB) will continue to lift interest rates. "We expect a 25 bps hike on 27 September; and if there is no moderation in indicators over coming month, then another 25 bps in early November as well," Commerzbank analysts said. They said in a note that the rate hike expectations only sporadically strengthen the crown as every move higher triggers profit-taking from investors who bought huge amounts of crowns before the CNB removed a cap on the currency in April. The forint shed 0.2 percent to 306.10, while the zloty reversed an early weakening and strengthened by 0.1 percent to 4.251. The Hungarian central bank knocked the forint down from 28-month highs two weeks ago with a verbal intervention, and investors will scrutinise minutes on Wednesday of its last rate-setting meeting for any reinforcement of its dovish message. "If not the minutes, then the inflation data due on Friday will be watched," said Zoltan Varga, analyst at Equilor brokerage. Robust regional economic growth has not boosted inflation above central bank targets except in the Czech Republic, which has the lowest goal at 2 percent. The Polish central bank is expected to keep interest rates on hold at its meeting on Wednesday and until the last quarter of 2018, but negative real interest rates and a labour shortage may increase worries over inflation later this year. "Rate hike speculation and the benign fundamental economic conditions could support some PLN (zloty) recovery over the coming months," Raiffeisen analysts said in a note. Moody's is due to review Poland's sovereign rating on Friday and investors are watching to see if that improves the outlook for the currency. On Monday, Moody's raised its economic growth forecast for Poland.

CEE MARKETS SNAPSH AT 1136 CET

OT CURRENCIES

Latest Previo Daily Change

us

bid close change in

2017

Czech crown 26.055 26.060 +0.02 3.65% 0 0 % Hungary 306.10 305.54 -0.18% 0.89% forint 00 50 Polish zloty 4.2510 4.2559 +0.11 3.60%

%

Romanian leu 4.5955 4.5955 +0.00 -1.32%

%

Croatian 7.4140 7.4231 +0.12 1.90% kuna % Serbian 119.50 119.08 -0.35% 3.22% dinar 00 00 Note: daily calculated previo close 1800 change from us at CET

STOCKS

Latest Previo Daily Change

us

close change in

2017

Prague 1022.6 1021.9 +0.06 +10.9 1 7 % 6% Budapest 37479. 37719. -0.64% +17.1 47 90 1% Warsaw 2522.7 2527.6 -0.19% +29.5 5 2 1% Bucharest 8077.0 8119.7 -0.53% +14.0 8 6 0% Ljubljana 814.59 814.51 +0.01 +13.5 % 2% Zagreb 1899.2 1896.9 +0.12 -4.79% 5 4 % Belgrade 725.26 724.71 +0.08 +1.10 % % Sofia 711.91 710.31 +0.23 +21.4 % 0%

BONDS

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

Republic

2-year -0.048 -0.022 +069b -2bps

ps

5-year 0.069 0 +041b +1bps

ps

10-year 0.888 0.006 +052b +2bps

ps Poland

2-year #VALUE 0.006 #VALUE +1bps ! ! 5-year 2.628 -0.007 +297b +0bps

ps

10-year 3.298 -0.002 +293b +1bps

ps

FORWARD RATE AGREEMENT 3x6 6x9 9x12 3M

interb ank

Czech Rep <PR 0.66 0.8 0.89 0

IBOR=>

Hungary <BU 0.21 0.25 0.31 0.15

BOR=>

Poland <WI 1.77 1.81 1.85 1.73

BOR=>

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

(Additional reporting by Jason Hovet in Pargie/Bartosz Chmielewski in Warsaw; Editing by Catherine Evans)