Wires

CEE MARKETS-Stocks plunge as investors fret over oil prices, coronavirus toll

the summer months.

March 9 (Reuters) - Central European stock indexes plunged on Monday as tumbling oil prices and the anxiety over the fast-spreading coronavirus hit markets globally after the number of new infections and fatalities jumped in Italy over the weekend. The government of Italy announced a lockdown of its wealthy Northern region on Sunday and urged and EU-wide package to ease the economic effect of the outbreak. The Budapest and Bucharest stock indexes led losses in the region after both dropped more than 8% by 0815 GMT. Prague lost 5.9% and Warsaw was down 6.5%. As of 0930 GMT, the bourses recouped some of the deep losses. Regional currencies also eased, with both the Hungarian forint and the Czech crown down by more than half a percent. The forint still held up fairly well, staying clear of its record lows of 340.60 to the euro, a level it hit two weeks ago. The Hungarian currency outperformed its peers because investors started to close their previously built carry-trade positions last week. The Czech crown hit its lowest level since last October and was down around 1%, along with the rest of the region, even before the bell, before regaining some ground. However, dealers said trading would stay highly volatile during the day. "The start of the week is dominated by the crash in the oil prices," Raiffeisen said in a note. Prices for crude oil dropped more than 30% after OPEC countries were unable to agree on production costs and Saudi Arabia launched a price war with Russia. "Lower oil prices can bring some relief to currently high inflation rates in several CE/SEE countries."

Investors are keenly watching what measures central banks and governments are willing to take to ease the economic blow from the coronavirus outbreak. Regional central bank officials expressed a cautious approach last week, suggesting that they need more time to assess the economic effects of the virus. The Polish central bank left benchmark interest rates unchanged at 1.5% at its rate-setting meeting last week. NBP governor Adam Glapinski said at the time that interest rates will remain stable, and the Monetary Policy Council (MPC) will react calmly in the face of the coronavirus. Two Polish MCP members have expressed different views since then. "Due to the significance of this threat, the possibility of lowering interest rates in our country should be seriously considered," Polish central banker Eryk Lon wrote for the website of Polish religious radio station Radio Maryja.

Polish rate-setter Jerzy Zyzynski said he would favour a rate cut of 50 basis points in May. On Monday, the Polish central bank's inflation projection showed that it expects GDP growth to slow to 3.2% in 2020 from 4% in 2019. Inflation is forecast to rise to 3.7% in 2020 from 2.3% in 2019. Hungary's central bank, the most dovish in the region is off the hook for rate hikes for now due to worries over the coronavirus outbreak and its possible adverse effect on the economies, analysts said. Czech forward rate markets are betting the central bank could reverse the surprise 50bps rate hike it announced on Feb 6

CEE SNAPSHOT ATMARKETS 0915 CET

CURRENCIE S

Latest Previous Daily Changebid close change in 2020Czech 25.5510 25.4210 -0.51% -0.47%

crown

Hungary 336.5000 334.6100 -0.56% -1.59%

forint

Polish 4.3182 4.3015 -0.39% -1.43%

zloty

Romanian 4.8140 4.8125 -0.03% -0.53%

leu

Croatian 7.5090 7.5125 +0.05% -0.85%

kuna

Serbian 117.5700 117.6000 +0.03% +0.00%

dinar

Note: calculated from 1800 CET

daily change

Latest Previous Daily Changeclose change in 2020Prague 906.02 962.8900 -5.91% -18.79%Budapest 37870.59 41185.29 -8.05% -17.82%Warsaw 1649.84 1764.81 -6.51% -23.27%Bucharest 8673.56 9445.03 -8.17% -13.07%Ljubljana 882.14 882.23 -0.01% -4.72%Zagreb 1819.14 1819.14 +0.00% -9.83%Belgrade <.BELEX15 781.04 781.04 +0.00% -2.58%>Sofia 529.93 529.93 +0.00% -6.73%Yield Yield Spread Daily(bid) change vs Bund change

in

Czech spread

Republic

2-year <CZ2YT=RR 1.6380 0.0000 +256bps +5bps>5-year <CZ5YT=RR 1.2510 -0.2010 +216bps -17bps>10-year <CZ10YT=R 1.2090 0.0090 +204bps +11bps

R> Poland

2-year <PL2YT=RR 1.2690 0.0040 +219bps +6bps>5-year <PL5YT=RR 1.3370 -0.0750 +225bps -4bps>10-year <PL10YT=R 1.6480 -0.0010 +248bps +10bps

R> FORWARD

3x6 6x9 9x12 3M

interban k

Czech Rep < 2.03 1.64 1.38 2.34

PRIBOR>

Hungary < 0.73 0.74 0.73 0.66

BUBOR=>

Poland < 1.42 1.19 1.06 1.70

WIBOR=> Note: FRA are for ask prices quotes

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(Additional reporting by Jason Hovet in Prague; Editing by Sherry Jacob-Phillips)

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