BUDAPEST/WARSAW: Central European stocks and currencies eased for a second session in a row on Friday on the back of growing market expectations of a US interest rate hike in March.
Asian and Western European stocks also followed Wall Street lower ahead of a speech by Fed Chair Janet Yellen, as the prospect of higher US rates turned investors towards bonds.
Warsaw's bluechip equities index fell 0.7 percent, mainly driven by banks, though the bourse's bank stock index hovered near the 21-month highs reached late last month.
Banks have been a key driver of the gains in regional stock indices to multi-year highs, part of a global rally, in past weeks, fuelled by expectations of a US spending stimulus and higher rates in the US, which may lift bank earnings.
Earnings reports published by Central European banks in the past weeks have also been promising.
The latest to report was Central Europe's biggest independent bank, Hungary's biggest lender OTP, which posted lower-than-expected fourth-quarter earnings but said annual profit in 2016 more than tripled to just over 200 billion forints. The outlook for 2017 was even brighter, it said.
But with investors unwinding stock positions, OTP's share price fell 0.7 percent, while Budapest' stock index eased 0.1 percent and is off the record highs set last month.
Higher risk provisions trimmed OTP's fourth-quarter profits, while the bank lifted its profit guidance for 2017.
"I do not think that the positive international stock market trend is reversed," Equilor Brokerage analyst Zoltan Varga said. "If the good mood returns next week, OTP could rise again."
Central Europe's main currencies also eased against the euro, with the zloty shedding 0.3 percent and the forint and the leu easing 0.2 percent.
Friday's weakening still leaves them within the past few weeks' ranges.
"We saw an attempt to firm the zloty (earlier this week), but it eventually failed to get out of the consolidation zone," said Konrad Ryczko, analyst at BOS Brokerage House, in a note.
"As a consequences, a small correction is visible and a return to an equilibrium level with a wider range of fluctuations," he added.
The Czech crown was steady in its implied exchange rates in forwards contracts, after the statistics office published a breakdown of fourth-quarter economic growth figures.
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