* Zloty leads FX fall as Greek worries intensify
* Romania may run larger deficit, tax hikes discussed
* CDS spreads, bond yields jump; stocks plunge
(Updates throughout)
By Marius Zaharia
WARSAW/BUCHAREST, May 5 (Reuters) - Central European
currencies and stocks took a dive to multi-month lows on
Wednesday, hit by fears the Greek crisis could spread, while
Romanian markets were rattled by budget talks with the IMF.
Central European markets were hammered by a general risk
sell-off after euro zone policymakers warned of looming
financial contagion if the debt crisis was not stopped in
Greece, as another peripheral state, Portugal, had its ratings
put on review by Moody's. []
Moreover, demonstrations in Athens against austerity
measures attached to the rescue package caused the death of
three people, highlighting the difficulty Greece faces in
solving its debt crisis.
In Romania, the leu <EURRON=> fell close to its lowest level
this year as markets feared the IMF would allow the government
to run a bigger deficit, while stocks <> showed their
biggest intra-day drop in a year at 6 percent before paring
losses as tax hikes were being discussed [].
At 1425 GMT, the zloty <EURPLN=> traded 2 percent weaker on
the day, while the Hungarian forint <EURHUF=>, the Czech crown
<EURCZK=> and the Romanian leu <EURRON=> were 0.7-0.9 percent
down. Bond yields rose by 15-50 basis points in Hungary, and by
around 8 basis points in Poland. Stocks fell 2-5 percent.
Currencies and stocks hit their lowest levels in about 2 to
7 months.
"Today's impulse to sell came after Moody's warned that
Portugal's rating could be cut," said Marcin Turkiewicz,
currency dealer at BRE Bank.
CONTAGION FEARS
The cost of insuring five-year sovereign debt rose in
Romania, Hungary and Ukraine on contagion fears. Hungary was
seen most vulnerable to contagion, with state debt set to peak
at 80 percent this year.
EBRD President Thomas Mirow said Bulgaria, Romania and
Serbia may suffer due to high levels of Greek banking exposure.
[].
The plunge in currencies helped ease previous fears that
strong exchange rates will hit recovery prospects. After the
zloty broke the psychologically sensitive level of 4.0 per euro,
the deputy head of the Polish central bank said the level was
"satisfactory". []
In the Czech Republic, the central bank is expected to adopt
a wait-and-see approach at Thursday's policy meeting. Analysts
are split over whether the central bank will cut rates one more
time after recent dovish comments.
"The (crown's) strengthening path seems to have been broken
by lower risk appetite, at least for the moment, and the central
bank's stance will certainly be influenced by the risks
development," Komercni Banka dealers said in a morning note.
"Moreover, our analysis of the forecast model shows that the
outcome will not point to a cut, but rather keep pointing to
rates being gradually raised later on the monetary policy
horizon."
Meanwhile, the European Commission issued a report saying a
stronger-than-expected global recovery will help lift emerging
Europe out of recession [].
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 26.042 25.827 -0.83% +1.06%
Polish zloty <EURPLN=> 4.08 3.996 -2.06% +0.59%
Hungarian forint <EURHUF=> 277.88 275.96 -0.69% -2.71%
Croatian kuna <EURHRK=> 7.254 7.252 -0.03% +0.76%
Romanian leu <EURRON=> 4.182 4.144 -0.91% +1.32%
Serbian dinar <EURRSD=> 99.32 98.91 -0.41% -3.46%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +19 basis points to 102bps over bmk*
7-yr T-bond CZ7YT=RR +16 basis points to +102bps over bmk*
10-yr T-bond CZ9YT=RR +17 basis points to +102bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +17 basis points to +411bps over bmk*
5-yr T-bond PL5YT=RR +21 basis points to +359bps over bmk*
10-yr T-bond PL10YT=RR +21 basis points to +294bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +64 basis points to +532bps over bmk*
5-yr T-bond HU5YT=RR +40 basis points to +481bps over bmk*
10-yr T-bond HU10YT=RR +26 basis points to +414bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1725 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaus, Writing by Dagmara Leszkowicz
and Marius Zaharia; editing by Jason Webb)
