*Stocks, currencies retreat on Greece, led by forint
*Prospects remain positive, say dealers and analysts
By Sandor Peto and Gergely Szakacs
BUDAPEST, April 15 (Reuters) - Central European currencies
and equities gave up early gains and slippped into the red later
on Thursday as rising Greek debt yields and credit default swap
spreads indicated renewed concerns over the country's debt.
"Greece," one Budapest-based currency trader said.
"Sentiment has gone bad out of the blue, all stock exchanges
slipped into the red, and the zloty also fell."
The news flow about the Greek debt crisis has often caused
short-term jitters in the region's markets but has not derailed
the longer-term firming trend in the region's currencies.
"I think CEE (Central Europe) will continue outperforming,
albeit at a slower pace. However, I can imagine some short-term
bumps on the way, perhaps if the NBP (Polish central bank)
intervenes again (to weaken the zloty)," said Gunnar Tersman,
analyst at Handelsbanken.
"Greece should not have a negative effect going forward," he
added. "Markets have realized, and will be increasingly
convinced, that CEE is in much better shape than many countries
in Western Europe."
Thursday's retreat was led by Hungary's forint <EURHUF=>,
the region's biggest gainer this week following the first round
of the country's elections on Sunday, which ushers in a strong
government led by the centre-right Fidesz party.
At 0957 GMT the forint was weaker by 0.6 percent versus the
euro from Wednesday, at 263.80, but firmer by about one percent
over the week.
Notes released by some foreign banks after the elections
showed optimism that the forint may firm to beyond 260 after the
second round of elections on April 25, while some local dealers
doubted that the unit has much further room to strengthen.
"I think the forint has already visited its short-term peak
(at 4-week highs on Wednesday)," one dealer said. "It's not a
strong currency which makes the economy more competitive."
GREEK IMPACT CUTS PRESSURE
Hungary's central bank is expected to cut its interest rates
further. The Polish central bank last Friday intervened to curb
the firming of the zloty, the best performing unit in the region
this year, its first such move since 2000. []
The fresh Greek debt weakening has led to an easing of the
euro <EUR=>, Central Europe's reference unit, relieving the
region's currencies of appreciating pressure in the short-term.
Both the zloty <EURPLN=> and the Czech crown <EURCZK=> eased
0.1 percent against the euro, while the Romanian leu <EURRON=>
was flat at 4.136.
"The market already suspects that below 4.1 they (the
central bank) are bidding through a couple of local banks (to
weaken the leu)," a dealer in Bucharest said. "Otherwise I don't
think they will say anything directly."
Equity indices in the region also retreated from early highs
and were mixed at 1017 GMT. Hungary's <> shed 0.9 percent
from Wednesday, Poland's <> fell 0.5 percent, the Czech
<> rose 0.1 percent and Romania's <> gained 0.4 percent.
Government bond yield spreads over Bunds widened across the
region by about two basis points. Traders said the Greek
concerns were unlikely to have a lasting impact on these bonds.
In Poland, the market awaited inflation data due at 1200
GMT. Price growth is seen easing to 2.6 percent year-on-year,
from February's 2.9 percent. The central bank targets inflation
at 2.5 percent.
Traders said the figures could lift government bonds if
inflation drops to a 30-month low as expected as investors could
take it as a possible signal that interest rates hikes now
expected later in the year will be delayed.
"Inflation is in a declining trend, which should continue at
least till July. However, if inflation proves higher than
consensus, this could be a factor cooling market optimism,"
Citibank wrote in a note to clients.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.071 25.045 -0.1% +4.97%
Polish zloty <EURPLN=> 3.865 3.862 -0.08% +6.18%
Hungarian forint <EURHUF=> 263.8 262.36 -0.55% +2.48%
Croatian kuna <EURHRK=> 7.256 7.256 0% +0.73%
Romanian leu <EURRON=> 4.136 4.136 0% +2.45%
Serbian dinar <EURRSD=> 98.919 99.58 +0.67% -3.07%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond CZ3YT=RR +2 basis points to 62bps over bmk*
7-yr T-bond CZ7YT=RR -1 basis points to +65bps over bmk*
10-yr T-bond CZ10YT=RR +1 basis points to +55bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +4 basis points to +344bps over bmk*
5-yr T-bond PL5YT=RR +2 basis points to +287bps over bmk*
10-yr T-bond PL10YT=RR +2 basis points to +240bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +2 basis points to +416bps over bmk*
5-yr T-bond HU5YT=RR +2 basis points to +356bps over bmk*
10-yr T-bond HU10YT=RR +2 basis points to +327bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1157 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, Writing by Gergely
Szakacs/Sandor Peto; Editing by Ian Jones)
