BUDAPEST: Polish equities climbed to their highest since mid-2015 on Wednesday as attention turned to local news in Central European markets and away from the risks related to France's elections.
Stocks and currencies in the region jumped earlier this week after centrist Emmanuel Macron won the first round of French presidential elections on Sunday, lessening the risk of a shift to the far right.
That rally lost steam by Wednesday. But Warsaw's main equities index reversed an early decline and rose 1.4 percent by 1257 GMT.
The index was pushed up by insurer PZU, which surged 5.2 percent after JP Morgan raised its recommendation for the share to "overweight" from "neutral".
Polish refiner Lotos jumped 9.3 percent, after reporting 288 percent annual rise in first-quarter earnings .
BZW BK stocks, on the other hand, plunged almost 4 percent after Poland's third-biggest bank reported a 19 percent annual fall in first-quarter profit.
Budapest's main index shed 0.7 percent. The decline was led by a 1.7 percent drop for OTP, the region's biggest independent bank, after Hungary's central bank signalled that it intended to keep interest rates low, eroding banks' interest income.
"Some investors are worried that the central bank may take measures to reduce bank margins," said Monika Kiss, an analyst at the Budapest-based brokerage Equilor.
The National Bank of Hungary has said repeatedly that it wants stronger competition among banks in lending and that bank mortgage spreads were too high.
"Yesterday's central bank (rate) statement was as expected, but it underpinned that loose monetary policy will remain and that is not favourable to banks," Kiss said.
While fresh central bank signals that it may take measures to tighten banks' margins and the rate statement affected OTP, Kiss added that the stock "remains a good paper".
The forint and the Czech crown eased by a quarter of percent against the euro. The crown has so far not surged in value since the central cap lifted its cap on its value, 27 to the euro.
"The market is shallow," said a dealer in Prague. "All those who bought it at 27 are waiting for 26-26.5 to cash out. They are waiting for the crown to move (higher) with good numbers from economy, rather than just market swings which last only couple of hours."
The leu weakened by 0.1 percent. Government figures late on Tuesday showed a small budget surplus in the first quarter but did not expel fears of a full-year deficit overshoot in 2017.
The government plans further public-sector wage increases, even though it would need to curb spending to keep the deficit below the European Union's ceiling, 3 percent of gross domestic product.
"However, the current space for manoeuvre will surely be more limited by the recent (politically irreversible) wage and pension hikes, plus new ones to come into force in July 2017," Erste analysts said in a note.
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