WRAPUP 1-Central Europe currencies dip as EU summit disappoints

                                
 * EU rejection of wider CEE bailout hits currencies
                                
 * Financial sector worries hurt sentiment, bonds inch down
                                
 * Morgan Stanley cuts forecasts on CEE banks
                                
 * Stocks lower, banks under pressure
                                
 
  (Wraps markets, PMI and growth data, Latvia intervention)
                                
 By Jason Hovet
                                
 PRAGUE, March 2 (Reuters) - Emerging European currencies
plunged on Monday, led by a drop of more than 2 percent for
Hungary's forint after a weekend summit of European Union
leaders rejected a mass bailout plan for the region.
                                
 The dismissal of Hungary's calls for a 180-billion euro plan
to support the bloc's eastern wing dashed hopes of a move toward
a broader deal that would underpin the whole region and steady
nerves that have hit even its better-balanced economies.
                                
 Central Europe's currency, debt and stock markets have been
battered by concerns about growth, banks and reliance on
external funding. Hungary and Latvia have already sought
bailouts from the International Monetary Fund.
                                
 EU leaders on Sunday held out the prospect of faster euro
zone entry for aspirants to the single currency, but analysts
said that offered little solace to investors who fear the
region's woes could also spill over to the West. [ID:nL1547427]
                                
 "The FX market's perception of the summit should be clear:
the EU again has proven that it is unable to manage a
coordinated response to the crisis," Commerzbank wrote in a
morning note.
                                
 The PMI purchasing managers' survey on Monday showed the
Polish and Czech manufacturing sectors still contracting,
although both readings were slightly improved on January.
[ID:nWAR007982] [ID:nL2713825]
                                
 Polish gross domestic product data showed the economy still
grew 2.9 percent year-on-year in the fourth quarter, slightly
better than expected although analysts warned the slowdown would
deepen. [ID:nL2411231]
                                
 Latvia's central bank said on Monday it spent 40 million
euros on buying lats last week, the first time the central bank
has moved to prop up the currency since it was bailed out by the
International Monetary Fund in December. [ID:nL2162776]
                                
 
                                
 EMERGING MARKET WORRIES
                                
 Investors also cut riskier emerging market positions as
financial sector worries were fuelled by a huge rights issue
from HSBC <HSBA.L> and news the U.S. government was set throw a
fresh lifeline to troubled insurer AIG. <AIG.N>.
                                
 The forint <EURHUF=> sank to 306.1 per euro by 1017 GMT,
down 2.2 percent from Friday's closing level but still off its
all-time low of 310. The Polish zloty <EURPLN=> lost 1.5 percent
to 4.745 per euro and the Czech crown <EURCZK=> shed 0.8 percent
to bid at 28.34 per euro. 
                                
 They have all slid to multi-year or record lows this year
due to a worsening string of economic data and worries over some
countries' heavy reliance on borrowing from abroad.
                                
 "The problems arising in Eastern Europe will put further
pressure on the euro," the Commerzbank note said.
                                
 The weaker currencies put pressure on the government bonds,
with yields continuing to tick up.
                                
 In Romania, seen as one of the region's most exposed
economies due to its high current account deficit, the leu
<EURRON=> outperformed on speculation that the central bank may
intervene, dealers said.
                                
 The market also left behind news from Friday that global
development banks had launched a 24.5 billion euro loan
programme to help speed up financing for businesses hit by a
drop in demand from the recession-stricken euro zone. Officials
and analysts said the region needed more. [ID:nLR50408]
                                
 "On Friday the forint was pushed firmer on hopes that we
will get money (from the EU)," a currency dealer said. "This
(summit) news is negative."
                                
 Stocks weakened Monday, mirroring losses in Western Europe
triggered by the financial sector fears. Prague <.PX> lost 1.5
percent while Warsaw <.WIG> <.WIG20> nudged lower. Banks came
under pressure after Morgan Stanley cut several price targets,
saying it remained cautious on the region. [ID:nWNAB8585]
                                
 Policymakers have been at pains to dispel the image of the
region as a single black hole, and analysts view countries like
Poland and the Czech Republic as more resilient to the crisis
than the Baltics, Hungary and Romania and Ukraine, the last of
which is not an EU member.
                                
 But many also say that investors will not differentiate
until the region secures a broader aid package to underpin
confidence. [ID:nLQ16865]
                                
 The zloty has shed 13 percent this year and a third of its
value versus the euro since hitting record highs last summer.
The forint has lost almost 14 percent in 2009, while the crown
is off 5.6 percent and the leu 6.8 percent. 
 (Reporting by Reuters bureaus, writing by Jason Hovet and
Patrick Graham)