Wires

CEE MARKETS-Stocks plunge, central banks in focus as Central Europe shuts doors to fight virus

Anita Komuves

doors to fight virus@ BUDAPEST, March 16 (Reuters) - Central European stock indexes plunged on Monday, with Budapest's equities leading losses as markets all over the world faced another tumultuous day after the U.S. Federal Reserve's emergency rate cut on Sunday failed to calm investors. Central banks around the world have cut rates and announced stimulus measures in recent days in order to try to ease the economic fallout from the spread of the coronavirus. The Fed slashed interest rates to near zero, pledged hundreds of billions of dollars in asset purchases and backstopped foreign authorities with the offer of cheap dollar financing. nL1N2B80FD "FX markets in the region had priced in this Fed cut before, that is why there are no dramatic moves in regional currencies now," a dealer in Budapest said. Governments across the CEE region introduced more and more restrictions over the weekend to stop the spread of the virus. Poland stopped international flights, Slovakia closed its borders to foreigners and the government of Hungary shut down schools starting from Monday. The Czech government on Friday imposed a ban on foreigners entering the country and Czechs traveling abroad as of Monday. Budapest's main index was down more than 8% by 0842 GMT with the country's largest bank OTP off more than 7%. Warsaw fell by 7.4%, while Prague was down by 5.9% and Bucharest by 5.6%. Regional central bankers sent mixed messages last week about the need for rate cuts in order to help economies during the coronavirus pandemic. However, markets are already pricing in easing, which puts pressure on local currencies. The Czech crown led losses in the region by falling 1.46% on Monday, trading at 26.659 to the euro. The crown has been the hardest hit local currency in recent weeks as it had been a popular currency for foreign investors to hold over the last couple of years, and because of growing expectations of rate cuts in coming weeks. Markets are pricing in about five rate cuts over the next year. CSOB bank said there was a chance the Czech central bank could cut rates by up to 100 basis points at its March 26 meeting. The bank's analysts said uncertainty will continue to impact markets. "Markets will only be interested in one thing, how quickly quarantine measures take effect and the daily rise of new cases start to drop," CSOB said. Czech central bank board member Oldrich Dedek told Reuters on Friday he was inclined to back an interest rate cut but still needed to consider by how much. He is the second member of the seven-person board to back a cut. A third rate-setter, Vojtech Benda, told Seznam Zpravy news website over the weekend he would not rule out a cut but that he would assess things at the March 26 meeting, adding rates should be used with caution. Elsewhere in the region, the forint was up 0.2% and traded at 339.65 to the euro after nearing its record low on Friday. The Polish zloty was down 0.4% at 4.393 to the euro while the Romanian leu was steady. The Polish central bank's Monetary Policy Council should lower borrowing costs now to limit the economic impact of the coronavirus outbreak, the bank's governor said on Friday.

The central bank of Hungary holds its weekly FX swap tender later on Monday. "Suddenly, with the Fed cutting rates so low, the 0.9% base rate in Hungary seems high," a trader in Budapest said. "However, with everything being so volatile and the forint trading around 340 to the euro, there might be a reason for the NBH not to accept all bids for FX swaps and to cool the market a bit," he added.

CEE SNAPSHO ATMARKETS T 0942

CET CURRENC IES

Latest Previou Daily Change

s

bid close change in 2020EURCZK Czech <EURCZK 26.6590 26.2700 -1.46% -4.60%= crown =>EURHUF Hungary <EURHUF 339.650 340.290 +0.19% -2.50%= forint => 0 0EURPLN Polish <EURPLN 4.3935 4.3751 -0.42% -3.12%= zloty =>EURRON Romanian <EURRON 4.8270 4.8260 -0.02% -0.80%= leu =>EURHRK Croatian <EURHRK 7.5900 7.5701 -0.26% -1.91%= kuna =>EURRSD Serbian <EURRSD 117.620 117.730 +0.09% -0.04%= dinar => 0 0Note: calculated from 1800daily CET

change

Latest Previou Daily Change

s

close change in 2020.PX Prague 776.34 825.150 -5.92% -30.41%

0

.BUX Budapest 31366.8 34189.0 -8.25% -31.93%5 9.WIG20 Warsaw <.WIG20 1264.63 1365.97 -7.42% -41.18%>.BETI Buchares 7438.14 7882.19 -5.63% -25.45%

t

.SBITO Ljubljan <.SBITO 723.01 762.12 -5.13% -21.91%P a P>.CRBEX Zagreb <.CRBEX 1410.71 1512.15 -6.71% -30.07%>.BELEX Belgrade <.BELEX 714.24 714.24 +0.00% -10.91%15 15>.SOFIX Sofia <.SOFIX 442.89 447.95 -1.13% -22.05%>Yield Yield Spread Daily(bid) change vs Bund change

in

Czech spread

Republic

CZ2YT= 2-year <CZ2YT= 1.6630 0.0350 +257bp +3bpsRR RR> sCZ5YT= 5-year <CZ5YT= 1.5070 -0.0080 +229bp -2bpsRR RR> sCZ10YT <CZ10YT 1.1040 0.0000 +168bp -1bps=RR 10-year =RR> s

Poland

PL2YT= 2-year <PL2YT= 1.4420 0.0130 +235bp +0bpsRR RR> sPL5YT= 5-year <PL5YT= 1.7450 -0.0520 +252bp -6bpsRR RR> sPL10YT <PL10YT 1.8330 0.0000 +241bp -1bps=RR 10-year =RR> s

FORWARD

3x6 6x9 9x12 3M

interba nk

Czech <CZKFRA 1.83 1.39 1.08 2.31Rep ><PRIBO

R=>

Hungary <HUFFRA 0.64 0.69 0.78 0.66><BUBOR

=>

Poland <PLNFRA 1.22 1.12 0.91 1.69><WIBOR

=>

Note: are for askFRA prices

quotes

(Additional reporting by Jason Hovet in Prague and Alan Charlish in Warsaw; Editing by Kirsten Donovan)