CEE MARKETS 2-Zloty weighed down by concern Polish PM may depart for Europe

Petrol dd Ljubljana

29/08/2014 13:49

(Recasts with rumours on Polish PM) 
    * ECB easing hope helps asset rebound after plunge on 
Ukraine 
    * Zloty underperforms on concern PM Tusk could quit 
    * Direction uncertain, CEE stock markets mixed 
 
    By Sandor Peto and Michal Janusz 
    BUDAPEST/WARSAW, Aug 29 (Reuters) - Poland's zloty  EURPLN=  
was under pressure on Friday due to reports that Prime Minister 
Donald Tusk may quit his post for a top job in the Europe Union, 
clouding his country's investment outlook. 
    Markets viewed his departure as potentially weakening the 
leadership of Poland and the ruling party when there is 
bloodshed in neighbouring Ukraine and ahead of general elections 
in Poland next year. 
    "London investors are worried over developments in the  
political scene in Poland after Tusk's (possible) departure," 
said one currency dealer of a bank in Warsaw.  
    The zloty hit a 5-month low at 4.236 to the euro in 
international trade ahead of the market opening in Warsaw, 
before rebounding. 
    But at 1051 GMT it was still close that level. It traded at 
4.221, firmer by 0.1 percent from Thursday, but underperforming 
the forint  EURHUF=  which rose 0.3 percent and the Czech crown 
 EURCZK=  which gained 0.2 percent. 
    Most of the region's assets were rebounding from a general 
plunge seen on Thursday when fighting between Ukrainian forces 
and Russian-backed separatists threatened to escalate. 
    The bounce was helped by figures showing a drop in euro zone 
inflation to a 5-year low in August. The data kept alive hopes 
that the European Central Bank, which will meet on Thursday, 
could loosen policy further, helping regional assets. 
    But the zloty gave up most of its early gains after rumours 
strengthened that Prime Minister Donald Tusk would be become the 
head of the European Council. Sources familiar with the 
selection process had already said on Thursday that Tusk 
seriously considered taking the job.   ID:nL5N0QY4PO  
    On Friday Polish parliament speaker Ewa Kopacz said that she 
would be ready to take over from Tusk as prime minister if he 
was elected the head of European Council.  ID:nL5N0QZ2IY  
    If confirmed, his appointment to chair and steer 
policymaking meetings of EU leaders would be a victory for the 
10 ex-communist central and eastern European countries that 
joined the EU a decade ago.  
    They have demanded that one of the top jobs go to a 
candidate from their region. It would also consecrate Poland's 
rise as a major player in the 28-nation bloc alongside EU 
founders France and Germany. 
    However, the prospect of Tusk quitting had triggered concern 
that his ruling Civic Platform party, which lags the 
conservative Law and Justice (PiS), in opinion polls, could 
suffer defeat at next year's domestic elections.  ID:nL5N0QY4EL  
    "Tusk had earlier indicated that he may not be interested, 
but this can change, so worth keeping an eye on. The Polish 
economy needs strong stewardship at this time; confidence is 
hard hit by Ukraine," Commerzbank said in a note. 
     
    UNCERTAIN MARKETS 
    The possible change at the helm of the region's biggest 
country adds to geopolitical uncertainty caused by the Ukraine 
crisis. Some players downplayed the risk, pointing to Friday's 
market rebound. 
    "Every miracle lasts for only three days: you could see 
during the Greek crisis that the waves it caused in markets 
became smaller and smaller, and that is the case with Ukraine, 
too," one Budapest-based fixed-income trader said. 
    Others were less optimistic. Raiffeisen said in a note that 
Western powers may impose more sanctions on Russia as early as 
next week. The impact could spread further in the economy, 
keeping Central European bonds under pressure, it said. 
    Hungarian government bonds firmed slightly, with the 10-year 
yield  PL10YT=RR  dropping 6 basis points to 4.45 percent. 
    Poland's corresponding yield  PL10YT=RR  returned to 
Thursday's closing levels of 3.1 percent, after testing record 
lows in early trade a touch below 3 percent.         
    Traders and analysts said the sudden shifts in market 
direction remained in the cards because investors were 
evaluating several conflicting factors. 
    "Fed (monetary) tightening would be negative and ECB 
loosening positive, while we have a huge question mark here, the 
Ukrainian crisis, and stagnation in the European economy," one 
Budapest-based equities trader said. 
    Equities markets were mixed, with Bucharest's main index 
 .BETI  leading a rebound of the region's most liquid stock 
markets with 0.85 percent rise, while in the southern, less 
liquid stock exchanges in the region stocks eased. 
    Ljubljana's main index  .SBITOP  shed 0.7 percent, dragged 
down by an over 3 percent plunge of the shares of the biggest 
Slovenian fuel retailer Petrol  PETG.LJ  which reported a 2 
percent fall in net profit in the first half of 2014 citing 
difficult economic conditions.  ID:nL5N0QZ0YL  
    Exports rather than consumption helped the Slovenian economy 
grow 2.9 percent in annual terms in the second quarter according 
to figures published on Friday. 
    Neighbouring Croatia said its economy contracted 0.8 percent 
in the same period. The main index of the Zagreb stock exchange 
 .CRBEX  fell 0.8 percent.        
 *                                                            * 
 **************** CEE MARKETS SNAPSHOT AT 1251 CET ************  
 ************************* CURRENCIES ************************* 
                            Latest  Previous   Daily   Change   
                            bid     close      change  in 2014  
 Czech crown      EURCZK=    27.772    27.827   +0.20%  -1.58%  
 Hungary forint   EURHUF=   314.910   315.860   +0.30%  -5.70%  
 Polish zloty     EURPLN=     4.221     4.225   +0.09%  -1.68%  
 Romanian leu     EURRON=     4.411     4.406   -0.11%  +1.12%  
 Croatian kuna    EURHRK=     7.623     7.630   +0.09%  -0.07%  
 Serbian dinar    EURRSD=   117.750   117.895   +0.12%  -2.76%  
 Note: daily change calculated from previous close at 1800 CET  
 **************************** STOCKS ************************** 
                            Latest   Previous  Daily   Change   
                                     close     change  in 2014  
 Prague           .PX         980.13   975.91   +0.43%  -0.69%  
 Budapest         .BUX      17783.00 17648.90   +0.76%  -3.01%  
 Warsaw           .WIG20     2425.79  2421.40   +0.18%  +0.89%  
 Bucharest        .BETI      7110.72  7050.56   +0.85% +09.77%  
 Ljubljana        .SBITOP     817.41   823.05   -0.69% +27.52%  
 Zagreb           .CRBEX     1848.95  1863.17   -0.76%  +3.85%  
 Belgrade         .BELEX15    628.09   633.98   -0.93% +13.87%  
 Sofia            .SOFIX      548.78   554.01   -0.94% +11.68%  
 ***************************** BONDS ************************** 
                        Yield    Yield    Spread     Daily      
                        (bid)    change   vs Bund    change in  
 Czech Republic                                      spread     
   2-year    CZ2YT=RR    0.184    -0.016   +019bps    -2bps     
   5-year    CZ5YT=RR    0.468    +0.033   +028bps    +3bps     
  10-year    CZ10YT=RR   1.216    +0.021   +031bps    +0bps     
 ******************* FORWARD RATE AGREEMENTS ****************** 
                            3x6     6x9    9x12 3M interbank 
 Czech Rep  CZKFRA  PRIBOR=   0.340   0.330  0.330   0.35  
 Hungary    HUFFRA  BUBOR=    2.255   2.290  2.430   2.14  
 Poland     PLNFRA  WIBOR=    2.160   2.040  2.040   2.59  
 Note: FRA quotes are for ask prices  
 ************************************************************** 
  
 (Reporting by Reuters buros; Editing by Toby Chopra) 
 ((sandor.peto@thomsonreuters.com)(+36 1 327 4744)(Reuters 
Messaging: sandor.peto.thomsonreuters.com@reuters.net)) 
  
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Keywords: MARKETS EASTEUROPE/