* Currencies, shares firmer amid Portugal austerity moves
* Also boosted by GDP data
* Regional sentiment still fragile, Hungarian bonds retreat
By Sandor Peto
BUDAPEST, May 13 (Reuters) - Central European shares and
currencies firmed on Thursday as a rebound from recent falls
continued, with reports of fresh austerity moves in Portugal
further easing concerns about fallout from the euro zone debt
crisis.
But government bonds in Hungary, which has the region's
highest debt level, retreated in a jittery, thin market, and
dealers and analysts said the mood in financial markets and risk
appetite would remain fragile.
"Sentiment ... will be a function of equity market
performance and potential one-off news related to the euro zone
fiscal issues," Hungary's CIB Bank said in a note on the region.
The bounceback by assets in the region has also been driven
by better than expected growth data from Hungary and the Czech
Republic released on Wednesday, which suggested the recovery was
gaining traction.
The region's most liquid currencies, the zloty <EURPLN=> and
the forint <EURHUF=>, continue to lead gains on Thursday.
The zloty firmed 0.8 percent against the euro by 1053 GMT to
3.954, staying on the firm side of the key 4.0 level, while the
forint gained 0.3 percent to 272.5. The Czech crown <EURCZK=>
firmed 0.2 percent, while Romania's leu <EURRON=> eased 0.1
percent.
The region's stock markets mostly tracked higher Asian and
Western European equities, though the pace of gains slowed
relative to early this week.
Romania's <> main equity index firmed 1.8 percent,
Hungary's <> rose 0.6 percent and Warsaw's <> gained
0.1 percent, while Prague's <> retreated 0.3 percent.
LOCAL WEAK SPOTS
The leu underperformed regional peers.
"We believe the pressure from a new round of fiscal
tightening rules added to an ongoing growth underperformance
will allow the National Bank of Romania to cut rates further, in
a more aggressive way," said Citigroup analyst Luis Costa in a
note.
"On the (leu) front, the story is not that straightforward,
as potential headwinds in the banking sector (20 percent owned
by Greek banks) could well derail the still feeble recovery
process."
In a separate note, Citigroup's Eszter Gargyan said
Hungary's central bank may pause its rate-cutting cycle due to
the rise in market volatility in the past month and risks to
fiscal policy under the country's new government.
Economy minister designate Gyorgy Matolcsy said the incoming
administration would focus on economic growth rather than on
joining the euro zone, which was in turmoil. []
A currency dealer said a forint firming beyond 270 against
the euro could open the way for bigger gains towards 260.
But Hungarian government bond yields gave up some ground in
profit taking and stood well above levels reached before last
week's surge due to concerns over the Greek crisis.
While Hungary's debt level remains well below that of
southern euro zone states, the country's assets are viewed as
vulnerable to signals that the euro zone bailout announced early
this week has failed to calm European market jitters.
"I would not say that the forint firms against the euro, I
would rather say that the euro weakens against everything
including the forint," one Budapest-based trader said.
"It's too risky to take positions in either direction," he
added. "The euro zone fiscal problems have not been solved. We
only see signs that it will be solved, while in the other hand
the big bailout package is there."
--------------------------MARKET SNAPSHOT--------------------
Currency Latest Previous Local Local
close currency currency
change change
today in 2010
Czech crown <EURCZK=> 25.398 25.437 +0.15% +3.62%
Polish zloty <EURPLN=> 3.954 3.984 +0.76% +3.79%
Hungarian forint <EURHUF=> 272.5 273.31 +0.3% -0.79%
Croatian kuna <EURHRK=> 7.252 7.254 +0.03% +0.79%
Romanian leu <EURRON=> 4.177 4.173 -0.1% +1.45%
Serbian dinar <EURRSD=> 99.64 99.897 +0.26% -3.77%
Yield Spreads
Czech treasury bonds <0#CZBMK=>
2-yr T-bond CZ2YT=RR +10 basis points to 105bps over bmk*
7-yr T-bond CZ7YT=RR +5 basis points to +100bps over bmk*
10-yr T-bond CZ9YT=RR -1 basis points to +87bps over bmk*
Polish treasury bonds <0#PLBMK=>
2-yr T-bond PL2YT=RR +3 basis points to +399bps over bmk*
5-yr T-bond PL5YT=RR -2 basis points to +338bps over bmk*
10-yr T-bond PL10YT=RR -2 basis points to +263bps over bmk*
Hungarian treasury bonds <0#HUBMK=>
3-yr T-bond HU3YT=RR +11 basis points to +533bps over bmk*
5-yr T-bond HU5YT=RR -5 basis points to +465bps over bmk*
10-yr T-bond HU10YT=RR +9 basis points to +393bps over bmk*
*Benchmark is German bond equivalent.
All data taken from Reuters at 1253 CET.
Currency percent change calculated from the daily domestic
close at 1600 GMT.
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(Reporting by Reuters bureaux, writing by Sandor Peto;
editing by John Stonestreet))
