BUDAPEST: Emerging European markets opened slightly stronger on Monday as markets digested last week's milder-than expected easing outlook from the European Central Bank and awaited a US Federal Reserve decision next week.
"It was a light start today after a rough last week," a trader in Budapest said. "What we saw last week was the correction so no major rebound is expected here. The trend should be clear with Fed rate hikes and ECB easing."
Currencies and stocks were mostly positive although some local analysts saw that as a rebound from recent lows, especially in Poland, and braced for a Fed rate hike, which could weaken the appeal of emerging market assets.
Poland, whose markets have underperformed this year, may face more trouble as investors worry about the new government's economic direction at a time when Western assets could offer higher returns.
A member of Polish central bank's rate setting panel on Sunday all but ruled out a further cut to record low rates at the next policy meeting in January, saying economic growth was expected to accelerate next year.
Polish bond prices hover around one-month lows, driven by rising yields on core markets and "concern about the prospects of domestic economic and fiscal policy," Bank Pekao said in a note to clients.
"The combination of global and local factors is unfavourable for Polish debt. The tender on Thursday will be a test of the market sentiment," it said.
At the session open, yields on 10-year bonds dropped by 2 points to 2.87 percent, off from the one-month high reached on Friday.
Other markets expected similar trends: minor gains near term, then taking clues from the Fed next week.
"We could see the Romanian leu making a slight comeback," analysts at ING Bank in Bucharest said. "Still, we do not expect large gains ahead of next week's Fed policy meeting which is widely expected to bring the first key rate hike in a decade."
Stocks were higher as well, with Poland's index adding 1 percent as energy companies PKN Orlen and PGNIG dictated the tempo there, adding 2.1 and 3 percent, respectively, in the first hour of trading.
Budapest stocks, which outperformed the region by far, adding more than 40 percent this year, were broadly flat.
"Emerging market stocks still trade under the influence of Friday's OPEC meeting," brokerage Equilor said in a note.
OPEC failed to agree on a new production quota on Friday, allowing member countries to pump near record-high levels of oil as OPEC fought to maintain its share on an oversupplied market.
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