* CEE assets slip, Greece and Dubai fuel budget worry
* Czech final Q3 GDP, inflation support flat rates
* Hungary GDP, trade beat estimates, cbank seen cutting
(adds fixed income, detail)
By Marius Zaharia and Sandor Peto
BUCHAREST/BUDAPEST, Dec 9 (Reuters) - Emerging European
assets extended the week's losses on Wednesday as Greece's
credit rating downgrade on Tuesday continues to fuel concern
over budget deficits in the European Union's periphery.
Currencies, equities and bonds eased across the region.
Gross domestic product figures were slightly better than
expected in Hungary and supported views that interest rates
would remain unchanged in the Czech Republic.
But recovery remains slow in the export-reliant region,
signs from their main market Germany remains mixed and state
debt dynamics in the region carry risks, highlighted by Greece's
fiscal problems, analysts said.
A firming of the dollar against the euro in the past days
signals a drop in risk appetite which weakened the region's
currencies, though they are seen posting gains in the next 12
months, lifted by economic recovery, market participants said.
The zloty<EURPLN=> and the forint, usual risk proxies in the
region, led losses, shedding 0.8 percent per euro by 1450 GMT.
Dealers said the forint may ease further to 277 from 276 in the
short term if investors' continue to shun risky assets.
While analysts expect the zloty to surge next year, the
forint is seen underperforming in region.[]
FISCAL CONCERNS
Final third-quarter Hungarian GDP data showed 7.1 percent
annual contraction, an inch less than in a preliminary estimate
[] and October foreign trade data showed a surplus
of 464 million euros, well above expectations [].
But the minutes of the Hungarian central bank's last meeting
underpinned expectations for further rate cuts [],
and the fiscal woes of Greece and Dubai highlights Hungary's
continuing vulnerability due to its high debt.
"Hungary has taken measures to cut the deficit but recovery
could be too slow next year to also reverse the trend of rise in
debt," said Gyorgy Barcza, analyst at K&H Bank in Budapest.
"Investors may not be tolerant to that and they may say
that whatever has been done (by Hungary) is no longer enough."
The Czech crown shed only 0.5 percent as economic data
cooled expectations for a central bank (CNB) rate cut next week.
Czech final third-quarter data showed the economy fell 4.1
percent on the year [], in line with estimates,
while November annual inflation stood at 0.5 percent, a touch
higher than forecast [].
"The breakdown confirms that household spending and general
consumption performed quite well," said Wood&Co analyst
Raffaella Tenconi. "Inflation ... came out higher than I
expected. It does argue that probably rates will remain
unchanged in the near term."
CNB rate setter Eva Zamrazilova said [] before
the figures were published that signs of rising inflationary
pressure or higher than expected consumer demand would support
keeping rates at 1.25 percent.
Meanwhile, Vice-Governor Mojmir Hampl said he saw no reason
to change his vote for stable interest rates.[]
Czech markets were also watching a row of parties ahead of
Wednesday's parliament vote on the 2010 budget.[]
Romania's leu <EURRON=> eased 0.3 percent after incumbent
Traian Basescu won the presidential race by a razor-thin margin,
a result challenged by the opposition. []
"Investors' assessment of Romania has deteriorated over the
last days as political tension has picked up," ING said in a
note. "Short term weakening prospects stem from risks coming
from the political scene."
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.814 25.698 -0.45% +3.64%
Polish zloty <EURPLN=> 4.161 4.126 -0.84% -1.11%
Hungarian forint <EURHUF=> 275.66 273.35 -0.84% -4.39%
Romanian leu <EURRON=> 4.245 4.233 -0.28% -5.43%
Serbian dinar <EURRSD=> 95.11 95.22 +0.12% -5.92%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +27 basis points to 121bps over bmk*
7-yr T-bond CZ7YT=RR +16 basis points to +112bps over bmk*
10-yr T-bond CZ10YT=RR +171 basis points to +258bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +3 basis points to +388bps over bmk*
5-yr T-bond PL5YT=RR +3 basis points to +349bps over bmk*
10-yr T-bond PL10YT=RR +3 basis points to +313bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +4 basis points to +553bps over bmk*
5-yr T-bond HU5YT=RR +3 basis points to +516bps over bmk*
10-yr T-bond HU10YT=RR +4 basis points to +449bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1550 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
For related news and prices, click on the codes in brackets:
All emerging market news []
Spot FX rates Eastern Europe spot FX <EEFX=>
Middle East spot FX <MEFX=> Asia spot FX <ASIAFX=>
Latin America spot FX <LATAMFX=>
Other news and reports
World central bank news [] Economic Data Guide <ECONGUIDE>
Official rates [] Emerging Diary []
Top events [] Diaries [] Diaries Index []
(Reporting by Reuters bureaus, Writing by Marius Zaharia/Sandor
Peto; Editing by Victoria Main)
