* Forint, zloty lead gains, crown stable
* Poland's June CPI in line with expectations, C/A better
* Czech May retail sales, C/A much worse than expected
* Hungary's inflation eases for now, rate cut seen
* Lithuania new president says against devaluation, IMF aid
(Adds impact of fresh data)
By Marius Zaharia and Krisztina Than
BUCHAREST/BUDAPEST, July 14 (Reuters) - The Polish zloty and
Hungary's forint led the region higher on Tuesday, supported by
rising global stocks and some local factors, while the crown
lagged its peers on weak retail and current account data.
Regional gains were driven by a rise in stocks worldwide and
by Goldman Sachs earnings results that some traders said came in
a bit better than expected. []
Stock markets across central eastern Europe also rose, with
Budapest leading gains with a 3.2 percent rise at 1321 GMT.
Polish consumer prices <PLCPIY=ECI> rose broadly in line
with expectations in June, data showed on Tuesday, cementing
expectations that the central bank will leave rates unchanged
when it meets later this month.[]
"Prices rose after the data, particularly inflation. But
this does not necessarily mean that the figure opened more room
for rate cut expectations - it was more price growth on a
short-term wave of optimism," said one Warsaw-based dealer.
"The current account data was also taken as a positive sign
that the external balances are improving," the trader added.
In Hungary, inflation surprised by easing in June, whereas
most analysts had expected it to pick up, thus supporting rate
cut expectations []. However, prices are expected to
surge later in the year due to announced tax hikes.
The forint and Hungarian bonds both gained on Tuesday.
"The level of 275 is very strong resistance for the forint.
Today the leader (in the region) was the zloty, it's being
pushed firmer due to ... a conversion of EU funds linked to big
motorway investments," a Budapest-based currency dealer said.
A fixed income trader said yields dropped by about 15 basis
points partly due to the better than expected inflation data.
A Bucharest dealer said market players were trying to push
the zloty and the forint beyond key levels of 4.35 and 275 -- a
move which accelerated gains.
The crown <EURCZK=> briefly fell beyond 26 per euro before
stabilising around that level, after retail sales came out much
weaker than expected, posting a 7.5 percent drop on the year in
May. [] <ECONCZ>
The current account also posted a much wider than expected
deficit in May, largely due to dividend payments by Czech
subsidiaries and investment abroad [], further
weakening sentiment.
The crown traded up 0.3 percent on the day at 1335 GMT, when
the Polish zloty <EURPLN=> and the Hungarian forint <EURHUF=>
were 1.43 percent and 0.9 percent stronger, respectively.
"The region feels better today in line with Asia ... except
for the Czech Republic, where the news flow is slightly more
negative," one dealer in Bucharest said.
Central bank Vice Governor Miroslav Singer said he expected
the economy to drop by more than three percent this year, deeper
than the latest official forecast. []
LITHUANIA AGAINST DEVALUATION
Lithuania's new president said on Tuesday she was against a
devaluation of the litas, which is effectively pegged to the
euro <EURLTL=>, and also opposed asking the IMF for help as long
as the country can obtain financing from international markets
[].
Markets took the comment with a pinch of salt and failed to
react to the news, given that worries of a possible devaluation
in the Baltic states -- especially in Latvia -- and a possible
spillover into the rest of emerging Europe remain high.
"I don't think it should have any major effect on the CEE,"
said Nordea's Anders Svendsen. "The risk of a Baltic devaluation
will remain a factor for the CEE currencies for some time."
----------------------MARKET SNAPSHOT-------------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.926 26.006 +0.31% +3.19%
Polish zloty <EURPLN=> 4.336 4.398 +1.43% -5.1%
Hungarian forint <EURHUF=> 275.25 277.76 +0.91% -4.25%
Croatian kuna <EURHRK=> 7.325 7.325 0% +0.55%
Romanian leu <EURRON=> 4.214 4.221 +0.17% -4.74%
Serbian dinar <EURRSD=> 93.077 92.877 -0.21% -3.86%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR -1 basis points to 156bps over bmk*
4-yr T-bond CZ4YT=RR -24 basis points to +175bps over bmk*
8-yr T-bond CZ8YT=RR +4 basis points to +305bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -9 basis points to +395bps over bmk*
5-yr T-bond PL5YT=RR -7 basis points to +317bps over bmk*
10-yr T-bond PL10YT=RR -8 basis points to +290bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -26 basis points to +737bps over bmk*
5-yr T-bond HU5YT=RR -65 basis points to +658bps over bmk*
10-yr T-bond HU10YT=RR -54 basis points to +552bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1534 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
For related news and prices, click on the codes in brackets:
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(Reporting by Reuters bureaus, writing by Krisztina Than and
Marius Zaharia, Editing by Ruth Pitchford/Victoria Main)
