BUDAPEST/WARSAW: Central European stocks eased on Monday, dragged down by a sell-off in Hungary driven by drugmaker Richter, now under investigation over an anti-tumour drug, and missing a rally in western Europe.
Germany's dollar-exposed equities index and other indices in the Western wing of the European Union rose after the US Senate passed a tax package that is expected to buoy equities markets globally.
Budapest led equities losses in Central Europe, with its main index shedding 0.6 percent by 1011 GMT, pushed down by an almost 5 percent fall in Richter's stocks.
Richter shares touched 8-and-1/2-month lows after the European Medicines Agency (EMA) began a review of the company's Esmya medicine used to treat non-cancerous tumours of the womb.
"This follows four reports of serious liver injury, three of which ended in liver transplantation, in patients treated with the medicine," EMA said on its website.
Warsaw's bluechip index eased 0.4 percent as shares of PKO BP, Poland's biggest lender, continued to retreat from almost-four-year highs reached last week.
The forint and the zloty, meanwhile, firmed 0.2 percent against the euro, indicating that they were not hurt by outflows into the dollar, which in recent months often weakened them in periods when the greenback strengthened.
The region's currencies are buoyed by figures showing robust economic growth, except for the leu which trades near record lows due to worries that Romania's economy is overheating.
Poland's annual inflation jumped to a 5-year high of 2.5 percent in November according to flash figures released last week.
Analysts still expect the Polish central bank to keep interest rates on hold at its meeting on Tuesday.
But the bank's statement after the meeting will be closely watched as some rate setters may become increasingly worried that inflation may rise above 3.5 percent, the upper limit of the bank's target range.
"The rates market seems to be pricing in some comment indicating an improvement in the economy and the resulting pressure on monetary tightening," Citi Handlowy analysts said in a note.
"If such a comment were to be presented then the zloty has a chance to strengthen further in relation to core currencies."
Romania's 10-year government bond auction is expected to attract "solid demand" even though the passage of the US tax cuts is bond-negative, ING analysts said in a note.
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