CEE MARKETS-Currencies range-bound, investors assess strong Polish, Czech PMI
CEE MARKETS-Currencies range-bound, investors assess strong Polish, Czech PMI
By Krisztina Than BUDAPEST, Jan 2 (Reuters) - Central European currencies opened the new year a touch weaker in thin trading, unfazed by strong December purchasing manager indices published on Monday. The December manufacturing readings could be a harbinger of a pickup in growth in the European Union's eastern wing in 2017, supported by fiscal loosening and an acceleration of investments in the region. "Investments have been a drag in CEE in 2016, mainly due to the major slowdown in EU fund inflows. This should reverse next year," Erste Bank said in a note. Economic growth in Central Europe outpaced the euro zone last year, and this year could bring about an acceleration in GDP growth, analysts said. Data published on Monday showed Poland's manufacturing index rising to a 17-month high of 54.3 in December, while the Czech PMI index climbed to a 9-month high. Hungary's PMI dropped in December from November due to end-year production shutdowns, but still remained strong. Hungary launched fiscal stimulus late last year, cutting the corporate tax rate and social taxes, and raising wages. This could push economic growth to above 4 percent this year, the government said. Prime Minister Viktor Orban's cabinet sees economic growth rising to 4.1 percent this year and 4.3 percent in 2018, when elections are due. In 2016 growth is expected below 3 percent. "Although Hungary seems to also be aggressively easing its fiscal stance lately, we see Poland and Romania at the limit as far as the 3 percent of GDP nominal Maastricht (budget deficit) threshold is concerned," Erste Bank said. In Romania the Social Democrats' election victory has heightened uncertainty over the country's ability to keep its budget deficit below the EU's ceiling, as their governing programme includes ambitious spending plans. Inflation is also expected to pick up in Central Europe, on the back of higher oil prices, faster consumption and rising wages. "Tight labour markets, structural funds flowing freely under the new semester and the implications of these for CPI inflation and rates will be the focus in CEE," Nomura analyst Peter Attard Montalto said in a note. "We expect Hungary to have the most upside risk on inflation, followed by Romania...," he added. As for stock markets, Budapest shares, which rose by a third in 2016 boosted by Hungary's upgrades to investment grade, were about half a percent lower on Monday. The Prague Stock Exchange's main index was down 0.2 percent. The region's most liquid market in Poland added 5 percent last year, and was flat on Monday. **************** CEE MARKETS SNAPSHOT AT 0934 CET ************ ************************* CURRENCIES ************************* Latest Previous Daily Change bid close change in 2017 Czech crown 27.020 27.019 +0.00% -0.05% Hungary forint 309.500 309.045 -0.15% -0.22% Polish zloty 4.413 4.408 -0.10% -0.19% Croatian kuna 7.551 7.556 +0.07% +0.05% Serbian dinar 123.330 123.300 -0.02% +0.02% Note: daily change calculated from previous close at 1800 CET **************************** STOCKS ************************** Latest Previous Daily Change close change in 2017 Prague 919.01 921.61 -0.28% -0.28% Budapest 31829.72 32003.05 -0.54% -0.54% Warsaw 1940.91 1947.92 -0.36% -0.36% Ljubljana 0.00 717.59 +0.00% -100.0% Zagreb 1996.10 1994.84 +0.06% +0.06% Belgrade 717.37 714.72 +0.37% +0.00% Sofia 586.43 586.51 -0.01% +0.00% ***************************** BONDS ************************** Yield Yield Spread Daily (bid) change vs Bund change in Czech Republic spread 2-year -0.99 -0.094 -022bps -11bps 5-year -0.18 +0.039 +037bps +5bps 10-year 0.480 +0.013 +029bps +3bps Poland 2-year 3.260 +0.060 +307bps +7bps 5-year 0.000 +0.000 +000bps +0bps 10-year 0.000 +0.000 +000bps +0bps ******************* FORWARD RATE AGREEMENTS ****************** 3x6 6x9 9x12 3M interbank Czech Rep 0.000 0.000 0.000 0.00 Hungary 0.000 0.000 0.000 0.00 Poland Ask Ask Ask Ask Note: FRA quotes are for ask prices (Reporting by Krisztina Than; Editing by Peter Graff)