* PMIs boost FX, crown touches 2009 high
* JP Morgan upgrades recommendation for region's equities
* Warsaw's WIG20 set for biggest gain in 2 months
(Updates prices, adds details, quotes)
By Dagmara Leszkowicz and Jason Hovet
WARSAW/PRAGUE, Aug 21 (Reuters) - The Czech crown touched
its highest level this year on Friday as central European
markets got a lift from rising PMI surveys in the euro zone that
lifted prospects for the region's export economies.
The surveys, showing a surprise rise to growth in central
Europe's main trade partner Germany, added to hopes central
Europe had also reached an economic bottom and spurred
currencies and stocks in Friday trade. []
Warsaw's blue-chip index <> led gains in stocks and
was set for its biggest gain in two months, while the Polish
zloty <EURPLN=> jumped 1.1 percent to bid at 4.093 to the euro.
At 1409 GMT the Czech crown <EURCZK=> was bid up 0.7 percent
at 25.404 to the euro, after trading as high as 25.375, its
strongest since Dec 1.
Romania's leu <EURRON=> was up at 4.218 per euro, while
Hungary's forint <EURHUF=> was up 1.2 percent, with local trade
closed due to a holiday.
"The German and also French data is supporting everything,"
said a Stockholm-based dealer.
Central Europe's economies have all fallen sharply due to
diminishing demand for their goods, with only Poland -- home to
the region's largest domestic consumer base -- avoiding
recession but still slowing sharply.
But data from the euro zone and region itself in the past
month has given the first glimmers of the start of recovery.
JP Morgan upgraded Poland, Czech Republic and Hungary to
overweight from underweight on Friday due to narrowing credit
spreads and stronger euro zone economic growth. [].
However, some analysts warn the region's return to growth
will be sluggish, especially as governments may be forced to cut
back spending as wide budget deficits ballooning ever further
and unemployment rises to multi-year highs.
"Improvement is fragile, and heavily dependent on a recovery
in global trade. Economic growth will also be hampered by tight
credit conditions, ongoing adjustment in labour markets, reduced
FDI flows and budget issues," Societe General wrote in its
weekly emerging markets report.
"In this context, the upside for EMEA FX appears limited,
especially after the gains already recorded since March."
RATES NEXT WEEK
Markets had generally quieted this week as investors took
stock of upcoming central bank policy meetings.
Hungary is expected to cut 50 basis points from the main
rate to 8 percent on Monday as the central bank tries to address
a severe recession, although analysts said a larger reduction
would not be a surprise. []
In Poland, still high inflation and better growth prospects
will likely push the central bank to hold rates unchanged for a
second straight month. []
Polish bonds were steady on Friday and their rally has
stalled this week due to shifting rate expectations.
Czech bonds were a touch stronger on the short end, and
analysts expected the papers to firm more in the coming months.
Raiffeisenbank, though, closed its buy recommendation for
Czech bonds with maturities of more than five years on Friday
due to risks, including upcoming early elections and possible FX
correction.
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2009
Czech crown <EURCZK=> 25.404 25.578 +0.68% +5.31%
Polish zloty <EURPLN=> 4.093 4.136 +1.05% +0.54%
Hungarian forint <EURHUF=> 267.81 271.06 +1.21% -1.59%
Croatian kuna <EURHRK=> 7.302 7.333 +0.42% +0.86%
Romanian leu <EURRON=> 4.218 4.235 +0.4% -4.83%
Serbian dinar <EURRSD=> 92.824 93.003 +0.19% -3.6%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +10 basis points to 72bps over bmk*
4-yr T-bond CZ4YT=RR -31 basis points to +130bps over bmk*
8-yr T-bond CZ8YT=RR -1 basis points to +252bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR -7 basis points to +359bps over bmk*
5-yr T-bond PL5YT=RR -11 basis points to +309bps over bmk*
10-yr T-bond PL10YT=RR -5 basis points to +278bps over bmk*
All data taken from Reuters at 1610 CET.
Currency percent change calculated from the daily domestic
close at 1500 GMT.
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(Reporting by Reuters bureaus; Writing by Dagmara
Leszkowicz/Jason Hovet; Editing by Patrick Graham)
