* Risk aversion up, some investors hold FX positions
* Hungary cbank meeting in view
(Adds fixed income)
By Jason Hovet
PRAGUE, Jan 22 (Reuters) - Stock markets in central Europe
fell for a second straight session on Friday, while currencies
held steady in the face of rising risk aversion due to worries
over Greek financial stability and new U.S. bank restrictions.
Emerging European equities pulled back further from
multi-month highs and followed global peers lower after U.S.
President Barack Obama proposed new restrictions on banks that
spurred risky asset sales. []
Prague stocks <> lost the most with a 1.9 percent fall
after hitting a 15-month high earlier this week.
Currencies took the risk pullback in stride, rising a touch
with the Polish zloty <EURPLN=> and Hungarian forint <EURHUF=>
in the lead but still off highs from earlier this month.
Central European assets have come under pressure this week
with investors worried about Greece's ability to finance its
budget deficit and the spillover potential for the region.
"The Obama plan has just added to (the risk aversion from)
the Greece worries," said a central European dealer based in
Stockholm.
The dealer said some investors were still holding positions
betting on renewed appreciation of emerging European currencies
in the weeks ahead, especially the zloty, which was at a year
high this week but failed to break below the 4 per euro level.
"The euro/zloty is still a favourite trade, but if this
panic gets (bigger), some more people will run for the door,"
the dealer said.
The zloty added 0.3 percent to 4.075 to the euro, while the
forint gained 0.3 percent but traded near 2010 lows before an
expected interest rate cut on Monday. []
Lower inflation and sluggish growth will probably prompt the
central bank to cut the key interest rate by 25 basis points on
Monday, analysts said in a Reuters poll this week.
The poll saw rates moving down to an all-time low of 5.5
percent in the first half, narrowing the premium paid on
Hungarian assets as compared to regional peers.
NEW BETS
In Poland and the Czech Republic, debate has turned to how
soon interest rates could rise. Czech interest rate swaps rose
this week after central banker Robert Holman said a hike could
come already in the second quarter. []
"Front curve now seems to be pricing the first hike as soon
as in May (70%), and some 100bp of hikes are priced until the
end of 2010, which seems a bit too much to us," Komercni Banka
dealers said in a note.
In other trade, the Czech crown <EURCZK=> was steady and
Romanian leu <EURRON=> dipped 0.1 percent.
Central European governments are expected to struggle to
hold down growing budget deficits this year despite a modest
economic recovery, and Greek woes spotlight the problems.
"Although we continue to see Emerging Europe decoupling from
the Greek spillover, short-term uncertainties are a risk
particularly for the higher indebted countries, including
Hungary and some of the Baltics but also those countries where
the fiscal picture is still unclear including Poland," said
Cheuvreux economist Simon Quijano-Evans.
Poland priced a placement of 11 percent stake in the
country's No. 2 refiner Lotos <LTOS.WA> at 406 million zlotys
($143.7 million) on Friday, as it pushes ahead with asset sales
to help fund its budget deficit. []
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 26.023 26.064 +0.16% +1.13%
Polish zloty <EURPLN=> 4.075 4.087 +0.29% +0.71%
Hungarian forint <EURHUF=> 270.62 271.53 +0.34% -0.1%
Croatian kuna <EURHRK=> 7.295 7.291 -0.05% +0.19%
Romanian leu <EURRON=> 4.135 4.13 -0.12% +2.48%
Serbian dinar <EURRSD=> 97.3 97.13 -0.17% -1.46%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +2 basis points to 94bps over bmk*
7-yr T-bond CZ7YT=RR -3 basis points to +138bps over bmk*
10-yr T-bond CZ10YT=RR -5 basis points to +123bps over
bmk**Benchmark is German bond equivalent.
All data taken from Reuters at 1109 CET.
Currency percent change calculated from the daily domestic
close at 1700 GMT.
For related news and prices, click on the codes in brackets: All
emerging market news []
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(Reporting by Reuters bureaus, writing by Jason Hovet; Editing
by Andy Bruce)
