Wires

CEE MARKETS-CEE stocks recover ground on stimulus hopes; leu hits fresh low

Radu-Sorin Marinas

BUCHAREST, March 10 (Reuters) - Central European stock indexes recovered some ground on Tuesday after marking their biggest drop since the 2008 financial crisis in the previous session as global markets rebounded amid hopes of fresh stimulus to cushion the impact of the coronavirus. In Romania, the leu hit a fresh all-time low as domestic political uncertainty ahead of a parliamentary vote of confidence added to the anxiety over new coronavirus cases across the world. However, most benchmark government bond yields managed to rise from record lows hit the previous day, as hopes for stimulus to support global growth in the face of epidemic lifted risk sentiment. As of 0950 GMT, the leu fell as low as 4.8255 to the euro before recovering slightly to trade virtually unchanged on the day. The Czech crown weakened 0.2%, while Hungary's forint and the Polish zloty were trading flat. "There were no factors to help firm the leu, both externally and domestically," said one dealer with a foreign bank in Bucharest. The Czech Republic will also close schools indefinitely and ban events hosting more than 100 people, Prime Minister Andrej Babis said on Tuesday. Political factors weighed in as Romania is being governed by an interim government with limited powers since Feb. 5, after lawmakers toppled the three-month-old centrist minority government of Prime Minister Ludovic Orban. Seeking to form a transitional government until a general election in November, Prime Minister-designate Florin Citu faces a vote of confidence in the highly fragmented parliament on Thursday, and pundits are evenly split regarding the outcome.

A rejection of Citu's cabinet will prolong the political deadlock for several weeks, with President Klaus Iohannis required to make a new nomination. Authorities took unprecedented measures on Monday to try to ward off the virus, shutting down all schools and banning all flights to and from Italy, after the number of new infections rose to 17. Central European stock indexes recovered partially on Tuesday, after falling in the previous session as investors fretted over the impact of the fast-spreading virus and as the number of new infections and fatalities jumped in Italy over the weekend. Budapest and Warsaw climbed between 1-3% after tumbling more than 7% in their worst one-day drop since December 2008. Investors have maintained a cautious stance and are awaiting to see measures adopted by central banks and governments 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. In Hungary, headline inflation came in at 4.4% year-on-year in February, above market forecasts and the central bank's own projection, while core inflation scaled levels not seen since the end of 2012, data showed on Tuesday. Hungary's national bank is the most dovish in the region with its base rate at 0.9%. The higher-than-expected inflation data in January has already put pressure on it, with deputy governor Marton Nagy saying the bank would use all available tools if needed to fight high inflation.

CEE SNAPSHOT ATMARKETS 1227

CET CURRENCIES

Latest Previou Daily Change

s

bid close change in 2020Czech 25.5800 25.5090 -0.28% -0.58%

crown

Hungary 335.7000 336.190 +0.15 -1.36%forint 0 %Polish 4.3210 4.3175 -0.08% -1.50%

zloty

Romanian 4.8180 4.8230 +0.10 -0.62%leu %Note: calculated from 1800daily CET

change

Latest Previou Daily Change

s

close change in 2020Prague 942.02 913.470 +3.13 -15.56%0 %Budapest 39127.52 38075.8 +2.76 -15.09%3 %Warsaw 1644.87 1625.99 +1.16 -23.50%

%

Buchares 8956.81 8733.96 +2.55 -10.23%t %Ljubljan 840.83 818.10 +2.78 -9.18%a %Zagreb 1689.92 1650.55 +2.39 -16.23%

%

Belgrade <.BELEX15 762.18 764.78 -0.34% -4.93%>Sofia 490.28 475.63 +3.08 -13.70%

%

Yield Yield Spread Daily(bid) change vs changeBund inCzech spread

Republic

2-year <CZ2YT=RR 1.6600 -0.0930 +257b -19bps> ps5-year <CZ5YT=RR 1.2290 -0.0160 +213b -11bps> ps<CZ10YT=R 1.1070 -0.0130 +184b -12bps10-year R> ps

Poland

2-year <PL2YT=RR 1.3000 0.1070 +221b +2bps> ps5-year <PL5YT=RR 1.3780 0.1220 +228b +3bps> ps<PL10YT=R 1.5650 0.1320 +230b +2bps10-year R> ps

FORWARD

3x6 6x9 9x12 3M

interba nk

Czech < Real-Time Real-Ti Real-T Real-TiRep PRIBOR=> Engine me ime meInitializa Engine Engine Engine

tion Error Initial Initia Initial ization lizati ization

Error on Error

Error

Hungary < Real-Time Real-Ti Real-T Real-TiBUBOR=> Engine me ime meInitializa Engine Engine Engine

tion Error Initial Initia Initial ization lizati ization

Error on Error

Error

Poland < Real-Time Real-Ti Real-T Real-TiWIBOR=> Engine me ime meInitializa Engine Engine Engine

tion Error Initial Initia Initial ization lizati ization

Error on Error

Error

Note: are for ask prices

FRA quotes

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(Additional reporting by Anita Komuves in Budapest and Jason Hovet in Prague; Editing by Sherry Jacob-Phillips)