* FX, stocks rise, German ZEW index supportive
* Bonds stable, Polish mkt waiting for Wed tender
* Zloty shows no reaction to steeper-than-seen wage growth
* CDS spreads tighten across central and eastern EU
(Adds Polish wage data, updates markets)
By Marius Zaharia and Marton Dunai
BUCHAREST/BUDAPEST, Aug 18 (Reuters) - Central European
currencies ended a two-session slide on Tuesday as sentiment in
the region's main export market Germany improved and instruments
showed a clear fall in risk perception in emerging Europe.
Stocks rose, led by the Budapest bourse, which was up 2.5
percent in the session and near last week's 10-month high.
The ZEW index, a key sentiment indicator in Germany,
improved more than expected to 56.1 in August, from July's 39.1,
its highest level since April 2006 [].
The indicator is key to central Europe because it helps
measure demand in the region's top export destination.
"Regional currencies firmed on ZEW, this is good news," one
dealer said.
That data, along with a recovery in Chinese stock markets
and news that crisis-stricken Lithuania had been taken off
negative watch by ratings agency Standard & Poors helped soothe
risk perception in the EU's eastern wing.
Five-year CDS spreads -- a rough equivalent to default
insurance against a country's debt -- dropped across the region.
Czech CDS prices fell to 86.8 from 95.6. Hungary's were down
more than 13 points to 253.1 and Poland's dropped almost nine
points to 131.2, according to CMA DataVision. That compared with
a rise in British CDS to 61.6, from 60.2.
Currency moves were more muted. The Czech crown rose 0.5
percent to 25.556 per euro and the Hungarian forint <EURHUF=>
was up 0.1 percent at 1315 GMT.
The Polish zloty <EURPLN=> was virtually flat, shrugging off
data that showed wages there had risen much more than market
expectations despite a fall in private sector jobs.
Polish wages were 3.9 percent higher than the same time last
year, almost double the analyst consensus of 2.1 percent. That
signalled strength in domestic markets, which has helped Poland
avoid the deep recession plaguing the rest of Eastern Europe.
"The zloty has dictated the tempo lately, but now it is
moving with the crown and the forint," a dealer in Budapest
said.
CORRECTION STILL POSSIBLE
The zloty has firmed more than 7 percent this summer and the
forint has gained almost 4 percent. Dealers say a correction for
these currencies is still possible in the next few days.
The crown is seen rather stable in the short run as it is
regarded as a safe heaven within the region, while the leu, the
weakest central European currency compared to the start of the
year, is seen rangebound in illiquid trade.
"The correction could still continue," one Bucharest-based
dealer said. "The zloty and the forint come after ... large
summer gains so a 2-3 percent correction cannot be ruled out."
Over a 12-month horizon, however, currencies are seen
firming, with the zloty outperforming its peers as Poland is set
to avoid recession this year.
Bonds were stable, with investors in Poland eyeing a T-bills
buy-back auction on Wednesday.
A higher than expected inflation reading has sent two-year
yields rising about 10 points since last week, as the market
started to consider more restrictive monetary policy, although
Central bank governor Slawomir Skrzypek said on Monday the bank
was still in monetary easing bias. []
Hungarian bond yields dropped 5 to 8 points in thin trade
across the curve, a dealer said, as the market prepared for a
four-day weekend followed by a rate decision on Monday.
Hungary cut rates by a bigger-than-expected 100 basis points
last month and has signalled further significant easing for the
rest of the year to help the economy fight deep recession.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.556 25.689 +0.52% +4.68%
Polish zloty <EURPLN=> 4.18 4.181 +0.02% -1.56%
Hungarian forint <EURHUF=> 273.19 273.47 +0.1% -3.53%
Croatian kuna <EURHRK=> 7.298 7.297 -0.01% +0.92%
Romanian leu <EURRON=> 4.215 4.219 +0.09% -4.76%
Serbian dinar <EURRSD=> 93.19 93.24 +0.05% -3.98%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +2 basis points to 59bps over bmk*
4-yr T-bond CZ4YT=RR +1 basis points to +120bps over bmk*
8-yr T-bond CZ8YT=RR 0 basis points to +254bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -2 basis points to +352bps over bmk*
5-yr T-bond PL5YT=RR +3 basis points to +300bps over bmk*
10-yr T-bond PL10YT=RR 0 basis points to +273bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR 0 basis points to +687bps over bmk*
5-yr T-bond HU5YT=RR 0 basis points to +621bps over bmk*
10-yr T-bond HU10YT=RR +1 basis points to +536bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1515 CET.
Currency percent change calculated from the daily domestic
close at 1500 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 bureaux, writing by Marius Zaharia,
Editing by Jon Boyle)
