* Stocks, bonds continue to rise on strong data momentum
* Currencies fall in thin trade, weak U.S. data
* FX in region should gain further, Reuters poll shows
(Updates throughout)
By Dagmara Leszkowicz and Marius Zaharia
WARSAW/BUCHAREST, Dec 3 (Reuters) - Central European bonds
and stocks gained on Friday, still supported by a batch of
favourable data earlier this week, but currencies failed to
track a stronger euro in thin trade.
Strong manufacturing figures this week increased bets for a
steady economic recovery, strengthening regional assets and
dealers said a raft of data publications next week could help
the trend consolidate unless euro zone debt spreads face renewed
pressure.
Mostly watched would be Czech Republic and Hungary, which
publish October industry figures on Tuesday and detailed
third-quarter gross domestic product data on Thursday.
However, as governments across the region gear up for
debates on the 2011 budgets and investors feel the risk of a
spillover from euro zone debt woes, volatility could persist,
dealers said.
"Liquidity was poor in Central Europe today and people look
bored, however they are already beginning to think about next
year's budgets," one trader said.
At 1451 GMT, Budapest stocks <> led gains in the region
having gained around 1.7 percent on the day, while Polish
<> and Romanian <> shares rose 0.7-0.8 percent.
Bonds edged higher, with Hungarian debt yielding 25-40 basis
points less than 15-month peaks hit at the end of last month.
Central bank Governor Andras Simor said on Friday that
further monetary tightening was likely after this week's
surprise rate hike to 5.5 percent, but dealers said markets have
already priced in higher rates in Hungary [].
"After the rate hike it was immediately visible that they
are preparing for further tightening," one trader in Budapest
said. "I think a further 25 basis point hike by March is
possible."
In the Czech Republic, a finance ministry debt issuance plan
published on Thursday surprised the market on the upside as most
analysts had expected a bigger figure. []
FX FALL IN THIN TRADE
But currencies were slightly weaker, failing to track gains
in the euro, their main reference currency, as they have been
for the past few weeks.
"I suppose the uncertainty over whether the euro would
continue to firm is quite high," one trader in Bucharest said.
Another trader said the correlation was briefly broken by
thin trade and by poor U.S. payrolls data which helped the euro
gain against the dollar, but also boosted demand for safe-haven
assets such as German Bunds and drove investors away from risk.
The Polish zloty <EURPLN=> and the Czech crown <EURCZK=>
were 0.2 percent weaker and the Hungarian forint <EURHUF=> was
0.3 percent down, while Romania's leu <EURRON=> was virtually
flat.
A Reuters poll showed on Thursday that economic recovery
should lift currencies in the European Union's eastern wing in
2011 but that the falls of the past few weeks could resume any
time if the euro zone debt crisis escalates. []
The zloty should lead gains with a rise of some 5.5 percent
over the next 12 months, the poll showed, while the forint is
expected to gain 2.5 percent, only partly offsetting a 3 percent
decline seen this year.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.013 24.964 -0.2% +5.22%
Polish zloty <EURPLN=> 3.99 3.984 -0.15% +2.86%
Hungarian forint <EURHUF=> 277.54 276.75 -0.28% -2.59%
Croatian kuna <EURHRK=> 7.374 7.405 +0.42% -0.88%
Romanian leu <EURRON=> 4.304 4.3 -0.09% -1.55%
Serbian dinar <EURRSD=> 107.21 107.04 -0.16%
-10.57%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +6 basis points to 103bps over bmk*
7-yr T-bond CZ7YT=RR -1 basis points to +81bps over bmk*
10-yr T-bond CZ9YT=RR -5 basis points to +95bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +2 basis points to +382bps over bmk*
5-yr T-bond PL5YT=RR -3 basis points to +356bps over bmk*
10-yr T-bond PL10YT=RR -8 basis points to +311bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR -9 basis points to +677bps over bmk*
5-yr T-bond HU5YT=RR -6 basis points to +611bps over bmk*
10-yr T-bond HU10YT=RR -16 basis points to +518bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1551 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 Dagmara Leszkowicz
and Marius Zaharia; editing by Patrick Graham)
