*Currencies, stocks rebound from Tuesday's slump on EUR/USD
*Polish unemployment drops but retail sales disappoint
*Romania readies for austerities, unions may announce strike
(Recasts with more details, new prices)
By Sandor Peto and Gergely Szakacs
BUDAPEST, May 26 (Reuters) - Central European stocks and
currencies rebounded on Wednesday from a slump in the previous
day as risk aversion abated in global markets and the euro
<EUR=>, the region's reference currency, was off early lows.
But dealers said sentiment remained fragile as concerns that
the euro zone debt crisis could widen continue to cast a shadow
to the markets of Central Europe which is heavily reliant on
exports to the euro zone.
Poland, the region's most robust economy said that annual
economic growth in the first quarter should be similar to 3.3
percent in the last quarter of 2009. []
But Polish economic data released on Wednesday were mixed.
Unemployment dropped to 12.3 percent in April from 12.9 percent
in March but retail sales surprised by falling 1.6 percent in
annual terms after an 8.7 percent surge in March.
[]
By 0930 GMT the region's main equity indices regained part
of the ground lost on Tuesday. Poland's <.WIG20) and the Czech
<> rose about 3 percent, Budapest's <> firmed 1.8
percent, while Romania's <> -- Tuesday's top loser --
gained six percent.
Currency gains were led by Hungary's forint <EURHUF=>, which
firmed 0.7 percent against the euro but remained the weakest
performer of the year in the region with a loss of about 2.5
percent since the end of 2009.
Poland's zloty <EURPLN=> firmed 0.6 percent, the Czech crown
<EURCZK=> 0.2 percent and Romania's leu <EURRON=> 0.1 percent.
"In case of easing tensions and nervousness (in global
markets) the Polish currency could further stabilize in the
sessions ahead," KBC said in its daily report on the region.
But most dealers said trade was likely to remain volatile in
the short term, driven by international news which influence
risk appetite rather than by local factors.
Analysts said the weak Polish retail figures signalled to the
central bank, which on Tuesday kept rates on hold, that it
should not hurry with rate hikes. Other analysts said further
zloty weakness could still prompt a hike later this year.
The nervousness of markets can lead Hungary's bank to stop
its rate cuts, dealers said.
"I expect no rate change at Monday's central bank meeting,"
one Budapest-based fixed income trader said.
ROMANIA TO CUT WAGES, BONDS REBOUND
In Romania, the centrist coalition government is expected to
approve drastic state wage and pension cuts on Wednesday in a
bid to avoid raising taxes and keep its 20 billion euros ($25
billion) IMF-led aid deal alive.
The cuts have angered the country's powerful unions, who are
expected to announce on Wednesday plans to trigger a general
strike as of May 31.
Dealers have said the central bank would likely move to curb
the leu's weakening. The leu has been emerging Europe's least
volatile currency so far this year and for most of 2009 and
dealers say the central bank has repeatedly stepped in.
"Should unions announce a general strike today we should see
some leu weakening, but we likely will not," said one trader in
Bucharest.
Government bonds in the region also rebounded, with yields
dropping a few basis points, but remain fragile, dealers said.
The Czech market eyes a midday benchmark 2019 bond auction.
The bond auction will be a crucial signal for further
direction, Komercni Banka dealers said.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.59 25.65 +0.23% +2.84%
Polish zloty <EURPLN=> 4.129 4.155 +0.63% -0.61%
Hungarian forint <EURHUF=> 277.87 279.92 +0.74% -2.71%
Croatian kuna <EURHRK=> 7.27 7.27 0% +0.54%
Romanian leu <EURRON=> 4.171 4.176 +0.12% +1.59%
Serbian dinar <EURRSD=> 103.4 102.49 -0.88% -7.27%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -6 basis points to 126bps over bmk*
7-yr T-bond CZ7YT=RR +9 basis points to +156bps over bmk*
10-yr T-bond CZ9YT=RR +1 basis points to +146bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -3 basis points to +582bps over bmk*
5-yr T-bond HU5YT=RR -9 basis points to +552bps over bmk*
10-yr T-bond HU10YT=RR -5 basis points to +475bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1130 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 Gergely Szakacs;
Editing by Ruth Pitchford/Toby Chopra)
