CEE MARKETS 2-FX inch up after better PMIs, stocks hang

                                
 * PMIs support crown, zloty as forint lags
                                
 * Romania's leu softer to start key week
                                
 * Czech markets less sure on rate cut
                                
 
  (Adds details, bonds)
                                
 PRAGUE, Nov 2 (Reuters) - A fall in equity markets muted
gains for central European currencies on Monday after
manufacturing indices in the region edged up to the breakeven
point signalling growth ahead.
                                
 Poland's Purchasing Managers' Index (PMI) rose to a 17-month
high in October of 48.8 [ID:nL2587070], while the Czech PMI
gained almost to the breakeven 50 level that divides contraction
from growth [ID:nL2486987]. [ID:nL2296405]
                                
 The moves gave a slight lift to Poland's zloty and the Czech
crown, but analysts stayed cautious on recovery for the hard-hit
region that is still bogged down by rising unemployment,
widening budget shortfalls and political uncertainty. 
                                
 "(The PMIs are) encouraging given the global backdrop," said
Simon Quijano-Evans, a Cheuvreux economist, adding that market
volatility has increased in the last week but should even out.
                                
 "This should be a temporary volatility because there has
been a strong rally... so markets and investors need a further
impulse."
                                
 Currencies have been knocked around in the past week as
investors pull back from a half-year rally, and strategists
expect the current blip not to be a complete reversal.
                                
 The Polish zloty <EURPLN=> inched up 0.2 percent to 4.249 to
the euro by 1011 GMT, and the Czech crown <EURCZK=> added 0.3
percent to 26.423 to the euro.
                                
 In Hungary, which uses a different PMI measure, the index
dipped to 48.2 percent, showing the choppy road ahead for
central Europe's export-reliant economies that have been
flattened by sinking demand in the past year. [ID:nL2604595]
                                
 Hungary's forint <EURHUF=> eased to 274.84. Stock markets
slipped up to 2.3 percent led by Budapest <.BUX>.
                                
 
                                
 RETHINK
                                
 Romania's leu <EURRON=> hovered on the weak side of 4.3 per
euro ahead of an expected interest rate cut on Tuesday and a 
confidence vote in designate Prime Minister Lucian Croitoru's
government later in the week. [ID:nLU224925]
                                
 Yield premiums have started to slip for higher-yielding
Hungarian and Romanian assets, although some analysts said the
latest bout of political uncertainty will keep Romanian
policymakers from cutting rates. [ID:nL7588830]
                                
 The Czechs have the lowest rates in the region at 1.25
percent, and talk of cutting more by central bank Governor
Zdenek Tuma has knocked the crown 4 percent since October, which
analysts say limits scope for easing. [ID:nLU554406]
                                
 Still, dealers said markets have mostly priced in a cut,
which could lead to correction on bond yields and rates.
                                
 "Verbal interventions alone have already weakened the Czech
currency significantly over the last month and eased the
inappropriately tightened monetary conditions," CSOB said.
                                
 In Poland, the central bank has moved to a neutral bias on
rates. The Finance Ministry estimated October inflation stood at
3.1 percent, down from 3.4 percent a month earlier but still
above the central bank's 2.5 percent target. [ID:nL2312718]
                                
 Dealers said the forecast was positive for bonds, which
showed little reaction to start the week.
                                
 
--------------------------MARKET SNAPSHOT--------------------
Currency                    Latest   Previous Local    Local
                                
                                  close    currency currency
                                
                                           change   change
                                
                                           today    in 2009 
Czech crown      <EURCZK=>   26.423   26.513  +0.34%    +1.25%
Polish zloty     <EURPLN=>    4.249    4.259  +0.24%    -3.15%
Hungarian forint <EURHUF=>  274.84   274.73   -0.04%    -4.11%
Croatian kuna    <EURHRK=>    7.225    7.225   0%       +1.94%
Romanian leu     <EURRON=>    4.305    4.306  +0.02%    -6.75%
Serbian dinar    <EURRSD=>   93.6     93.31   -0.31%    -4.4%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
3-yr T-bond   CZ3YT=RR    -2 basis points to  134bps over bmk*
7-yr T-bond   CZ7YT=RR   +14 basis points to  +122bps over bmk*
10-yr T-bond  CZ10YT=RR    -1 basis points to  +100bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond   PL2YT=RR   +1 basis points to  +367bps over bmk*
5-yr T-bond   PL5YT=RR   +1 basis points to  +324bps over bmk*
10-yr T-bond PL10YT=RR    -2 basis points to  +289bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1212 CET.
Currency percent change calculated from the daily domestic 
close at 1700 GMT.
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 (Reporting by Reuters bureaus, Writing by Jason Hovet; Editing
by Andy Bruce/Ruth Pitchford)