CEE MARKETS-Leu falls after PM quits, CEE stocks set multi-year highs

* Leu nears record low after PM resignation Ruling party meet later to decide on new candidate

* German stocks rally helps Prague, Warsaw hit multi-year highs

(Recasts with stocks rally, new analyst comments) BUDAPEST/BUCHAREST, Jan 16 (Reuters) - The leu approached record weak levels and Bucharest stocks missed a regional rally a day after Romania's Prime Minister Mihai Tudose resigned, becoming the second premier to be ousted in seven months. The leu eased 0.3 percent to 4.6535 against the euro by 1135 GMT, off the day's low at 4.661. Tudose's Social Democrat Party (PSD) withdrew its backing for him in an overwhelming vote on Monday. He had been embroiled in a row with the party's powerful leader Liviu Dragnea.

While Romanian equities fell, other bourses in Central Europe hit or tested multi-year highs. Warsaw's blue-chip index was the highest since late 2013. It rose by 1.4 percent, with Poland's biggest bank, PKO BP leading the rally. PKO shares were the highest in almost seven years, and the index of Warsaw-listed banks set a 3-year high. Demand for stocks was lifted by a rally in the equities of Germany, the region's main trade partner, said Tomasz Kolarz, analyst of Alior Bank's brokerage arm. "Moreover, our economy is strong," he said, adding that technical factors also helped Warsaw's index which rose in a high turnover. Bucharest's main index, meanwhile, shed a quarter of a percent. Tudose's resignation does not signal a change in economic policy but adds to Romania's political instability caused by in-fighting and corruption scandals. The ruling party proposed European MP Viorica Dancila for new prime minister after a unanimous vote by the party's leadership, party officials said. President Klaus Iohannis named Defence Minister Mihai Fifor as interim premier. There are significant risks that a prolonged political crisis comes, but a swift solution is the most likely outcome, ING analysts said. "This will be short-term negative for leu and government bonds," they said in a note. One Bucharest-based trader said there was not much reason for the leu to strengthen. Politics in Central Europe's fast-growing economies generally had little influence in markets in the past year. Czech Prime Minister Andrej Babis's minority government is expected to lose a confidence vote in parliament due at around 1300 GMT. The Czech crown was still steady at 25.518 against the euro. Prague's main stock index gained only a quarter of a percent, but that was enough to lift it to a 6-and-1/2-year high. Even if Babis loses the confidence vote, his government will stay in office until a new one is formed and he may end up leading any new government. He requested lawmakers on Tuesday to lift his parliamentary immunity so he can face allegations of fraud, but he remains popular. Czech government bond yields were bid higher by a few basis points. The Czech finance ministry said on Monday that it would double the maximum planned offer at Wednesday's scheduled auction of bonds maturing in 2023, 2028 and 2033.



Latest Previous Daily Change bid close change in 2018 Czech <EURCZK 25.5200 25.5250 +0.02% +0.09% crown > Hungary <EURHUF= 309.0000 308.9300 -0.02% +0.62% forint > Polish <EURPLN= 4.1820 4.1765 -0.13% -0.14% zloty > Romanian <EURRON= 4.6535 4.6385 -0.32% +0.56% leu > Croatian <EURHRK= 7.4260 7.4325 +0.09% +0.06% kuna > Serbian <EURRSD= 118.3000 118.1900 -0.09% +0.17% dinar > Note: calculated from 1800 CET

daily change

Latest Previous Daily Change close change in 2018 Prague 1111.63 1109.090 +0.23% +3.10%


Budapest 39872.45 39579.11 +0.74% +1.26% Warsaw 2577.64 2542.65 +1.38% +4.73% Bucharest 8234.97 8254.85 -0.24% +6.21% Ljubljana <.SBITOP 830.68 828.40 +0.28% +3.01% > Zagreb 1869.06 1870.76 -0.09% +1.42% Belgrade <.BELEX1 768.98 768.01 +0.13% +1.21%


Sofia 714.62 714.31 +0.04% +5.49%


Yield Yield Spread Daily (bid) change vs Bund change


Czech spread


2-year <CZ2YT=R 0.7340 0.1010 +131bps +11bps


5-year <CZ5YT=R 1.0050 0.0540 +114bps +7bps


10-year <CZ10YT= 1.7410 0.0000 +118bps +3bps

RR> Poland

2-year <PL2YT=R 1.6200 0.0090 +220bps +2bps


5-year <PL5YT=R 2.5840 -0.0320 +271bps -2bps


10-year <PL10YT= 3.2760 -0.0220 +272bps +1bps




3x6 6x9 9x12 3M

interban k

Czech Rep 1.04 1.21 1.34 0.76


Hungary 0.10 0.17 0.24 0.02 Poland 1.75 1.78 1.87 1.72

Note: FRA are for ask prices quotes



(Additional reporting by Radu Marinas in Bucharest/Bartosz Chmielewski in Warsaw; Editing by Raissa Kasolowsky, William Maclean)