BUDAPEST/LJUBLJANA: Oil shares pushed down by declining crude prices put pressure on Central European stock markets on Friday and Slovenia's stock index touched a four-month low.
Mixed currencies and bonds indicated that the region's markets were finishing a directionless week in a "wait and see" mode ahead of Italy's referendum, Romania's elections and a possible Federal Reserve interest rate hike next month.
Warsaw's blue-chip stock index dropped 0.8 percent by 1137 GMT. The shares of Poland's top refiner PKN Orlen fell by 2.1 percent.
Hungarian oil group MOL shed 0.8 percent and Budapest's main index dropped 0.2 percent.
Ljubljana's main index was up 0.1 percent, off a new 4-month low.
Slovenia's upper house of parliament vetoed a bill on the 2017-2018 government budgets on Thursday, saying they should give municipalities more money and factor in public sector wage demands.
Wage demands have been increasingly in the focus of politics in the region due to flight of skilled workers to richer Western European states, which causes a labour shortage in some sectors.
The small Slovenian stock market has been underperforming due to the outlook of individual shares rather than politics, and also ignored Thursday's news that business sentiment rose to its highest levels since 2008, analysts said.
"The main reason for the falling of the Ljubljana SBI index over the past few months are poor results of pharmaceutical company Krka," said Saso Stanovnik, chief economist of investment firm Alta Invest.
"Krka could fall further in the coming weeks, pulling the index down with it," he added.
Regional currencies were mixed, with the forint firming 0.3 percent and the zloty 0.1 percent against the euro, while the leu eased 0.1 percent.
Hungarian government bond yields dropped further, still helped by robust demand at Thursday's auctions.
The 10-year yield fell 5 basis points to 3.45 percent.
It is still higher by about 30 basis points since Donald Trump's shock victory at the US elections, which boosted yields, mainly on long-dated bonds, in US debt markets and across the world.
Polish bonds gave up part of their early price gains as US Treasuries yields rose again slightly.
"Risks include Italy's referendum... but yields have come up a lot (in the past one month)," one Budapest-based fixed income trader said.
The European Central Bank said on Thursday it was watching for any fallout from Italy's constitutional referendum which threatens with political uncertainty if it leads to Prime Minister Matteo Renzi losing his seat.
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